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THE    HISTORY 


OF 


The  Surplus  Revenue  of  1837 


AN  ACCOUNT  OF   ITS  C  RIGIN,  ITS    DISTRIBUTION  AMONG  THE 

STATES,  AND    THE    USES    TO  WHICH    IT 

WAS    APPLIED 


BY 


EDWARD   G.  BOURNE,  B.A. 

FOOTE  SCHOLAR  IN  YALE  COLLKGK 


NEW  YORK  &  LONDON 

G.    P.   PUTNAM'S    SONS 

Stije  $nirktibock«  ^rtss 

1885 


COPYRIGHT    BY 

G.   P.  PUTNAM'S  SONS 
1885 


Press  of 

G.  P.  Putnam's  Sons 

New  York 


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MY    FATHER    AND    MOTHER 


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PREFACE. 


In  the  following  pages  I  have  endeavored  to  present  a  complete 
and  impartial  history  of  the  origin  and  growth  of  the  Surplus 
Revenue  of  1837,  and  more  especially  of  its  disposition  by  the 
States  among  which  it  was  divided. 

The  work  may  seem  to  the  general  reader  more  like  a  collection 
of  facts  than  the  story  of  an  important  incident  in  our  history. 
Of  this  defect,  if  it  be  a  defect,  I  am  as  well  aware  as  one  can  be; 
but  if  I  am  not  mistaken  this  is  the  natural  function  of  first 
works  in  a  new  field.  Some  one  must  clear  the  ground,  loosen 
the  soil,  and  raise  a  plain  but  useful  crop  before  the  finer  growths 
can  flourish. 

Until  after  most  of  my  material  had  been  collected  I  supposed 
I  was  an  absolute  pioneer  in  making  a  thorough  investigation  of 
the  history  of  the  surplus  in  the  States.  I  was  then  informed 
that  Mr.  Eaton,  U.  S.  Commissioner  of  Education,  had  touched 
upon  the  subject  in  an  address  delivered  in  1877.  Some  ten  pages 
of  this  address  were  devoted  to  the  appropriations  for  education 
which  thirteen  of  the  States  had  made  from  portions  of  the  sur- 
plus that  had  been  deposited  with  them. 

Mr.  Eaton,  however,  studied  the  matter  only  in  its  relation  to 
the  question  of  national  aid  to  education,  and  so  took  note  of 
only  such  appropriations  of  the  money  as  were  made  for  schools; 
he  merely  looked  in  upon  the  field  rather  than  explored  it. 

Some  prefatory  remarks  upon  the  method  and  scope  of  the  in- 
vestigation are  prefixed  to  the  Bibliographical  Index. 

I  wish  to  acknowledge  my  obligations  to  the  correspondents 
who  have  kindly  helped  me  in  gathering  the  facts.  To  Prof- 
Sumner  I  am  under  especial  obligations  for  directing  my  attention 
to  this  subject,  and  for  encouragement  since  the  work  was  under- 
taken. 

Corrections  of  errors  or  any  additional  information  will  be  grate- 
fully received. 

E.  G.  B. 

New  Haven,  May,  1885. 

V 


CONTENTS. 


CHAPTER  I. 

PACK 

The  surplus  question — Early  proposals  of  distribution       .         .         .         .         i 

CHAPTER  II. 
The  growth  and  disposition  of  the  surplus         ......       12 

CHAPTER  III. 
The  different  opinions  of  the  measure        .......       21 

CHAPTER  IV. 

The  specie  circular — The  growing  surpluses — Succeeding  surplus,  and  the 

action  taken  by  the  States  upon  tlie  deposits         .....       27 

CHAPTER  V. 

The  steps   taken    to   carry  out    the  act — The  panic   and  the  fourth    in- 
stalment     ............       35 

CHAPTER  VI. 
The  surplus  in  the  States  ...         ......       44 

CHAPTER  VII. 
The  surplus  in  the  States.     (Continued)  .         .         .         .         ...       56 

CHAPTER  VIII. 
The  surplus  in  the  States.     (Continued)    .......       70 

CHAPTER  IX. 
The  surplus  in  the  States.     (Continued)  ...         ....       82 

CHAPTER  X. 
The  surplus  in  the  States.     (Continued) 95 

CHAPTER  XI. 
The  surplus  in  the  States.     (Concluded)  .......     107 

vii 


Vlll  CONTENTS. 


CHAPTER  XII. 


PACE 


Some  general  effects  of  the  accumulation  and  distribution  of  the  surplus, 

especially  upon  the  internal  improvement  system  ....     125 

APPENDIX  I. 

A  supplement  to  "Examiner's"  views,  mentioned  on  page  16.  The 
attempt  is  simply  to  calculate  what  would  have  been  the  excess  of 
receipts  over  expenditures  of  the  Government  if  there  had  been  no 
fever  of  speculation     .         .         .         .         .         .         .         .         .         .137 

APPENDIX  II. 

Statement  of  amount  on  deposit  in  the  New  York  banks,  to  the  credit  of 
the  Government,  January  i,  1837,  also  the  same  April  26th,  and  the 
amounts  credited  to  the  State  April  26th.  By  subtracting  the  sum  of 
the  last  two  columns  from  the  first,  we  get,  as  a  remainder,  the  amount 
of  Government  funds  withdrawn  from  New  York  in  less  than  four 
months 139 

APPENDIX  III. 
A  list  of  the  towns  in  Massachusetts  that  appropriated  more  or  less  to 

education,  from  the  surplus  revenue,  during  the  years  1841  and  1846     .     145 

APPENDIX   IV. 

The  appropriations  for  schools  made  from  the  "  Surplus  Revenue  "  by  the  towns 
in  New  Hampshire  during  four  years  ......     149 

Bibliographical  Index       .         .         .         .         .         .         .  ,         .         .151 


THE  HISTORY  OF  THE  SURPLUS 
REVENUE  OF   1837 


CHAPTER  I. 

THE     SURPLUS    QUESTION — EARLY     PROPOSALS     OF     DISTRIBUTION, 

The  Secretary  of  the  Treasury,  in  his  annual  report,  dated  De- 
cember 3,  1883,  announced  that  according  to  present  estimates  all 
bonds  payable  at  the  pleasure  of  the  Government  would  be  re- 
deemed before  June  30,  1887.  The  debt  then  remaining  will 
consist  chiefly  of  "  four  and  a  half  per  cents.,"  redeemable  Sep- 
tember I,  1891,  and  "four  per  cents.,"  redeemable  July  i,  1907. 
Before  these  dates  these  bonds  can  be  redeemed  only  by  paying  a 
large  and  growing  premium. 

Within  less  than  three  years,  then,  supposing  no  serious  dimi- 
nution of  the  national  revenue  to  be  effected  by  legislation  or 
treaty,  the  country  will  be  brought  face  to  face  with  a  very  urgent 
financial  question.  For  either  some  sudden  and  radical  reduction 
of  taxation  must  take  place,  or  the  debt  must  be  bought  at  a  great 
disadvantage,  or  a  surplus  of  upward  of  $85,000,000  a  year  must 
be  disposed  of. 

This  prospect  of  a  great  surplus  has  aroused  some  discussion, 
but  it  has  hardly  received  the  attention  that  it  deserves.  Some 
attempts,  also,  have  been  made  to  reduce  the  revenue,  but  as  yet 
they  have  been  unavailing. 

Roughly  speaking,  three  ways  are  proposed  to  meet  this  surplus 
question  ;  two  by  the  protectionists,  and  one  by  the  revenue  re- 
formers, or  free-traders,  as  they  are  commonly  called. 

The  revenue  reformers  demand  a  reduction  of  taxation  suffi- 
cient to  forestall  any  troublesome  surplus.  They  do  not  consent 
to  the  abolition  of  the  excise  taxes  on  spirits,  fermented  liquors, 


2  SURPLUS  REVENUE. 

and  tobacco,  because  these  taxes  collect  a  large  revenue  without 
increasing  the  cost  of  the  necessaries  of  life. 

On  the  other  hand,  a  large  number  of  the  uncompromising  pro- 
tectionists demand  the  immediate  repeal  of  our  internal  revenue 
laws  as  the  surest  and  safest  way  to  lessen  the  national  income. 

These  two  propositions  strike  at  the  root  of  the  evil  by  reducing 
taxation.  The  other  division  of  the  protectionists,  however,  take 
the  bull  by  the  horns,  and,  instead  of  regarding  a  surplus  as  dan- 
gerous and  likely  to  be  a  nuisance,  they  look  upon  it  as  an  un- 
mixed blessing. 

This  party  is  led  by  men  belonging  to  the  National  or  Pennsyl- 
vania school  of  political  economy.  They  agree  with  the  revenue 
reformers  in  considering  the  excise  too  useful  a  tax  to  be  dis- 
pensed with  ;  but,  on  the  other  hand,  they  hold  that,  apart  from 
questions  of  revenue,  a  high  protective  tariff  is  a  good  thing  in 
itself.  With  these  views,  they  are  strictly  logical  when  they 
declare  that  the  surplus  should  be  used  rather  than  that  steps 
should  be  taken  to  prevent  its  accumulation.  If  their  premises 
in  regard  to  protection  and  the  excise  are  sound,  their  position  is 
impregnable  ;  for  it  would  be  folly  to  give  up  a  great  good  like 
protection  to  avoid  the  little  trouble  of  rightly  using  a  possible 
surplus. 

This  party  accordingly  propose,  as  a  solution  of  the  problem, 
the  distribution  of  the  surplus  among  the  States.'     To  disarm 

'  See  Thompson  and  "  The  Surplus  Question."  The  following  bills  were 
introduced  during  the  first  session  of  the  Forty-eighth  Congress  (1884)  : 

January  8th,  Mr.  Goff,  of  West  Virginia,  (by  request,)  introduced  a  bill  to 
appropriate  a  portion  of  ihe  surplus  revenue  of  the  United  States  among  the 
several  States  and  Territories  (H.  R.,  2886  ;   15  Cong.  Record,  294). 

January  2gth,  Mr.  Evans,  of  Pennsylvania,  (by  request,)  introduced  a  bill 
(H.  R.,  4268)  to  provide  for  the  general  welfare  by  the  advancement  of  education 
and  the  extinction  of  the  public  debt  in  the  several  States  of  the  United  States 
through  the  utilization  of  the  surplus  revenue  (15  Cong.  Rec,  737).  This  is,  I 
suppose,  what  was  known  through  the  press  as  the  "  Wharton  Barker  scheme  " 
of  distribution,  and  Prof.  Thompson's  pamphlet  was  written  to  expound  and 
defend  it.  To  meet  any  constitutional  objections  it  is  so  worded  as  to  find  ref- 
uge under  the  broad  shelter  of  the  "  general  welfare  clause." 

May  I2th,  Mr.  Barbour,  of  Virginia,  introduced  a  joint  resolution  to  complete 


SURPLUS  REVENUE.  3 

prejudice,  they  affirm  that  it  is  no  new  thing  ;  that  the  idea  was 
favorably  entertained  by  the  great  men  of  the  past  ;  and  that,  in 
fact,  it  has  been  tried  once,  in  1837,  under  some  disadvantages, 
but  even  then  with  encouraging  results. 

To  enable  people  to  judge  whether  the  so-called  distribution  of 
1837  is  a  precedent  for  what  has  been  lately  proposed,  and  to  set 
forth  for  the  first  time  a  full  account  of  a  once  exciting,  but  now 
almost  forgotten,  incident  in  our  financial  history,  is  the  aim  of 
this  work. 

So  far  as  the  writer  knows,  Thomas  Jefferson  was  the  first  to 
propose  a  distribution  of  surplus  revenue.  Such  a  proposition  he 
advanced  in  his  second  inaugural  address,  delivered  March  4, 
1805,  while  speaking  of  the  import  duties.  ''These  contribu- 
tions," said  he,  "  enable  us  to  support  the  current  expenses  of  the 
Government,  to  fulfil  contracts  with  foreign  nations,  to  extinguish 
the  native  right  of  soil  within  our  limits,  to  extend  those  limits, 
and  to  apply  such  a  surplus  to  our  public  debts  as  places  at  a 
short  day  their  final  redemption,  and  that  redemption  once 
effected,  the  revenue  thereby  liberated  may,  by  a  just  repartition 
among  the  States,  and  a  corresponding  amendment  of  the  Consti- 
tution, be  applied,  in  time  of  peace,  to  rivers,  canals,  roads,  arts, 
manufacturers,  education,  and  other  great  objects  within  each 
State."  ' 

The  excess  of  revenue  which  Jefferson  expected  appeared  in 
Gallatin's  report  of  December,  1805,  where  it  was  shown  that 
"  the  surplus  in  the  Treasury,  after  meeting  all  the  regular  ex- 
penditures and  Navy  deficiencies,  French  claims,  and  the 
$1,750,000  of  the  Louisiana  purchase,  for  which  a  loan  had  been 
authorized,  would  still  exceed  one  million  dollars  on  a  reasonable 
estimate."  The  debt  would  be  paid  within  four  years.  The  next 
year  there  was  a  surplus  of  $4,000,000  in  the  Treasury,  and  "  only 

the  deposits  of  the  fourth  instalment  of  the  surplus  revenue  of  the  United  States 
with  such  of  the  States  as  were  entitled  thereto  under  the  act  of  June  23,  1836 
(H.  R.,  249  ;  15  Cong.  Rec,  4078). 

No  one  of  these  bills  has  yet  been  discussed,  so  far  as  I  know. 

'  8  Jefferson's  Works,  41. 


4  SURPLUS  REVENUE. 

three  years  remained  before  the  day  when  some  disposition  must 
be  made  of  the  excess  of  revenue."  ' 

With  this  problem  in  view,  Jefferson,  instead  of  suggesting  a 
gradual  reduction  in  the  revenue,  said  :  "  Shall  we  suppress  the 
impost,  and  give  that  advantage  to  foreign  over  domestic  manu- 
factures ?  On  a  few  articles  of  more  general  and  necessary  use 
the  suppression  in  due  season  will  doubtless  be  right,  but  the  great 
mass  of  the  articles  on  which  impost  is  paid  are  foreign  luxuries, 
purchased  by  those  only  who  are  rich  enough  to  afford  themselves 
the  use  of  them.  Their  patriotism  would  certainly  prefer  its  con- 
tinuance and  application  to  the  great  purposes  of  the  public  edu- 
cation, roads,  rivers,  canals,  and  such  other  objects  of  public 
improvement  as  it  may  be  thought  proper  to  add  to  the  constitu- 
tional enumeration  of  federal  powers."  ^ 

It  will  strike  the  reader  perhaps  that  Jefferson's  ideas  have 
been  carried  out  practically  by  the  great  log-rolling  appropriation 
bills  of  later  times.  This  is  true  in  a  sense,  but  Jefferson's  propo- 
sitions nevertheless  deserve  mention  in  an  account  of  the  attempts 
at  distribution, 

Jefferson  and  Gallatin  had  large  plans  for  a  National  University, 
but  they  were  not  destined  to  be  realized.  To  be  sure,  there  was 
a  surplus  of  over  five  million  dollars  in  1807,  but  it  rapidly  dis- 
appeared as  Jefferson's  great  gun-boat  scheme  was  carried  into 
effect.  What  was  left  after  this  waste  ^  was  soon  absorbed  in 
general  expenditures,  since  the  embargo,  another  favorite  measure, 
well-nigh  destroyed  the  commerce  which  filled  up  the  Treasury. 

1  Adams'  "  Gallatin,"  348-9. 

"  It  is  but  justice  to  JefTerson  to  remember  that  the  tariff  was  lower  then  than 
it  has  ever  been  since.  The  ratio  of  that  tariff  to  ours  is  roughly  that  of  fifteen 
to  forty.  The  similarity  between  the  views  of  Jefferson  and  the  ideas  of 
modern  protectionists  who  favor  distribution  is  one  of  principle.  Those,  how- 
ever, who  are  familiar  with  Jefferson's  views,  may  well  doubt  whether  he  would 
have  advocated  such  a  measure  under  the  conditions  now  prevailing.  He  kept 
his  constitutional  objections  to  distribution  and  to  national  appropriation  for 
improvements,  etc.,  till  the  end  of  his  days.  As  late  as  1825  he  repeated  in  his 
letters  his  conviction  that  a  constitutional  amendment  was  necessary  to  provide 
for  such  cases. — 73  Niles,  264. 
«  Adams'  "Gallatin,"  352. 


SURPLUS  REVENUE.  5 

Jefferson  still  expected  in  1808  a  surplus  soon  after  freedom  of 
commerce  should  be  restored  ;  but  freedom  of  commerce  was  not 
restored,  the  Embargo  Act  was  followed  by  the  Non-Intercourse 
Act,  and  in  1809  Gallatin  announced  a  deficit.'  The  trouble  in- 
creased rather  than  lessened,  and  war  soon  followed. 

It  is  in  1S16  and  181 7  that  we  next  hear  of  excessive  revenues. 
The  large  importations  which  succeeded  the  long  period  of  re- 
striction produced  "a  casual  surplus  of  five  or  six  millions."  It 
was  unexpected  and  was  quickly  and  extravagantly  spent  ;  but  it 
was  before  the  eyes  of  Congress  long  enough  to  arouse  expecta- 
tions of  more,  so  that  twenty  millions  were  disposed  of  "  upon  the 
strength  of  these  six  millions."  ^ 

A  season  of  distress  soon  followed,  during  which  the  Govern- 
ment had  to  borrow. 

At  this  time,  too,  the  distribution  theory  appears  again  in  a 
modified  form.  After  the  charter  of  the  Second  United  States 
Bank,  a  bill  was  brought  forward  providing  that  the  dividends  on 
the  seven  millions  of  stock  in  the  bank,  owned  by  the  General 
Government,  as  well  as  the  bonus  which  the  bank  paid  for  its 
charter,  "should  be  expended  in  each  State  respectively  in  propor- 
tion to  the  number  of  its  inhabitants  ";  and  secondly,  that  "  the 
money  should  be  applied  in  constructing  such  roads,  canals,  and 
so  forth,  in  the  several  States,  as  Congress  might  direct  with  the 
assent  of  the  State."  '  This  measure,  commonly  known  as  the 
"  Bonus  Bill,"  was  vetoed  by  Madison  on  constitutional  grounds.* 

During  the  following  ten  years  there  was  an  annual  "  surplus  of 

1  revenues  over  all  expenditures  of  from  two  to  six  millions  of 

j  dollars."  '  But  this  excess  was  steadily  applied  to  the  payment  of 
1  • ~  "  ~~~ 

'  Ibid.,  412. 

"In  1827  Mr.  Dickerson,  of  New  Jersey,  said  that  this  surplus  "  produced  an 
effect  upon  the  body  politic  something  like  that  produced  in  the  human  system 
by  the  pressure  of  blood  upon  the  brain, — it  produced  a  political  vertigo,  the 
effects  of  which  may  still  be  seen  and  felt." — 3  G*ales  and  Seaton,  214. 

^  4  Webster's  Works,  514.  *  12  Niles,  36  and  67. 

^  Knox,  167.  Mr.  Knox's  interesting  and  valuable  study  of  the  distribution 
of  the  surplus  was  not  published  till  after  this  work  was  written,  but  I  have 
availed  myself,  where  it  was  possible,  of  some  of  his  facts.  His  chapter  treats 
one  or  two  points  at  much  greater  length  than  I  have  done. 


6  SUJiPLUS  HE  VENUE. 

the  public  debt.  By  1827,  however,  the  country  had  become  so 
prosperous  that  visions  of  surplus  revenues  exceeding  the  charges 
of  the  debt  began  to  appear.  As  regards  revenue  the  country  was 
then  in  much  the  same  state  as  in  1805-6,  or  as  at  the  present  day. 
The  income  exceeded  the  regular  expenditures  to  a  degree  that 
allowed  large  annual  payments  of  the  principal  of  the  national 
\debt.  In  1827  the  total  extinction  of  the  debt  was  sure  within  a 
'dozen  years  ;  now  all  the  debt,  which  can  be  redeemed  with  advan- 
tage, will  be  paid  within  three  years,  that  is,  by  June,  1887. 

In  view  of  the  similarity  of  the  two  periods,  it  is  interesting  to 
note  that  in  both  cases  long  before  the  crisis  the  danger  to  the 
tariff  was  foreseen,  and  very  similar  schemes  were  devised  to 
save  it. 

On  the  13th  of  December,  1826,  Mahlon  Dickerson,  a  Demo- 
cratic Senator  from  New  Jersey,  introduced  a  bill  prescribing  that 
$5,000,000  a  year,  taken  from  the  Sinking  Fund,  should  be  dis- 
tributed for  four  years  among  the  States  in  the  ratio  of  direct 
taxation,  beginning  January  i,  1828,  and  ending  January  i,  1831, 
He  prescribed  no  especial  use  to  which  this  money  should  be 
applied,  but  the  object  was  to  aid  internal  improvements  and 
education.  If  the  plan  worked  well,  it  was  to  be  made  perma- 
nent ;  after  the  payment  of  the  debt,  the  amount  for  yearly  dis- 
tribution would  be  $15,000,000. ' 

Mr.  Dickerson  tried  to  bring  his  bill  up  again  January  30th, 
and  he  succeeded  in  so  doing  February  ist,  when  he  supported 
it  in  a  long  speech. 

He  advocated  distribution  because  the  debt  would  shortly  be 
paid  at  the  existing  rate,  when  either  the  country  would  enter 
upon  a  career  of  extravagance,  or  duties  would  be  most  suddenly 
and  disastrously  reduced.  Furthermore,  distribution  removed 
the  temptation  for  the  National  Government  to  spend  its  funds 
on  internal  improvements,  which  action  was  both  contrary  to  the 
genius  of  our  Government,  and  creative  of  bad  patronage  and 
corruption.    He  also  advocated  an  excise  tax  on  domestic  spirits  ; 

'  31  Niles,  260.  See  also  Thompson,  "  Relief  of  Local  and  State  Taxation," 
p.  12. 


SURPLUS  REVENUE.  J 

for  the  States,  being  forbidden  to  lay  imposts,  and  not  daring  to 
lay  excises  for  fear  of  driving  away  industries,  were  forced  back 
upon  direct  taxation,  an  odious  method  by  which  it  was  difficult 
to  get  revenue  enough  for  education  and  internal  improvement.' 

The  bill  was  laid  upon  the  table,  on  motion  of  Mr,  Benton.^ 
Though  the  measure  was  brought  up  again  December  17,  1827, 
and  ordered  for  a  second  reading,  nothing  further  came  of  it. 
In  reference  to  this  proposition,  Calhoun  stoutly  and  rightly  main- 
tained that  the  chief  object  in  view  was  to  protect,  strengthen, 
and  perpetuate  the  protective  system."  The  plan,  notwithstand- 
ing the  two  defeats,  was  still  cherished.  In  the  following  March, 
iMr.  Johnston,  of  Louisiana,  in  the  course  of  some  remarks  on  a 
resolution  of  Senator  Benton's,  in  reference  to  the  public  debt, 
affirmed  that  if  there  should  be  a  surplus,  he  was  in  favor  of  in- 
ternal improvements  on  a  large  scale.  If  this  should  not  meet 
the  favor  of  the  people,  he  greatly  preferred  the  distribution  of 
the  surplus  among  the  States  to  the  abolition  of  duties.  "  If  the 
distribution,"  said  he,  "  was  for  no  other  purpose  than  to  levy  a 
fund  for  the  support  of  the  State  governments,  it  would  be  infi- 
nitely preferable  to  the  abolition  of  duties." " 

The  next  proposal  to  distribute  the  surplus  came  from  a  man 
who  afterwards  repented  having  made  it.  Jackson,  in  his  first 
message,  December,  1829,  discussed  the  prospects  of  a  surplus 
revenue,  which  he  expected  would  soon  exist,'  as  no  satisfactory 

'  3  Gales  and  Seaton,  210.  It  will  be  seen,  by  comparing  Prof.  Thompson's 
discussion  of  this  plan  (Relief,  etc.,  p.  12)  with  his  own  plan,  that  the  Demo- 
crats of  1827  occupied  the  same  position  in  several  respects  now  held  by  the 
Penn.  Republicans.  The  proposition  to  levy  an  excise  on  spirits,  to  increase 
the  sum  for  distribution,  recalls  Mr.  Blaine's  proposition. 

^  31  Niles,  268. 

}:  Calhoun's  Works,  53  and  573. 
\^9  Benton's  Abridgment,  537. 

'  Secretary  Ingham,  in  his  Treasury  report,  at  the  same  time  estimated  a 
surplus  of  income  over  expenditures  of  twelve  million  dollars  yearly  for  the 
next  five  years.  As  the  amount  of  debt  which  would  be  payable  or  fall  due  in 
this  period  was  only  $48,522,869,  there  would  be  a  surplus,  after  paying  this 
indebtedness,  of  about  twelve  million  dollars.  This  indebtedness  was  all  paid 
January  i,  1833.  During  1833  the  debt  had  to  be  bought  at  market  prices. 
Knox,  168  and  178. 


8  SURPLUS  REVENUE. 

adjustment  of  the  tariff  seemed  possible.  On  account  of  the 
doubtful  constitutionality  of  national  improvements,  he  considered 
that  "the  most  safe,  just,  and  federal  disposition  which  could  be 
made  of  the  surplus  revenue  would  be  its  apportionment  among 
the  several  States,  according  to  the  ratio  of  their  representation  ; 
and  that  should  the  measure  not  be  found  warranted  by  the  Con- 
stitution, it  would  be  expedient  to  propose  to  the  States  an 
amendment  authorizing  it."  ^ 

A  year  later  his  mind  had  begun  to  waver ;  after  noting  that 
unequal  distribution  of  funds  for  internal  improvements  would 
cause  irritation  and  log-rolling,  he  went  on  to  say  that  he  had 
previously  recommended  some  plan  of  distribution  of  any  surplus 
among  the  States  in  proportion  to  their  representation,  to  be  ap- 
plied to  internal  improvements.  Although  this  plan  had  met  with 
favor  in  some  quarters,  objections  had  been  brought  up  that  the 
/ratio  of  allotment  was  unfair  ;  that  such  a  procedure  would  en- 
courage oppressive  taxation  ;  that  the  plan  would  bring  about  im- 
provements of  a  local  rather  than  of  a  general  nature  ;  and,  lastly, 
that  the  States  would  become  discreditably  and  injuriously  depen- 
dent upon  the  federal  power.^  The  principal  alterations  proposed 
by  the  critics  of  Jackson's  plan  were  two.  Some  proposed  that  the 
importations  of  a  district  should  be  the  standard  by  which  the 
share  of  any  district  should  be  calculated,  while  others  proposed 
the  relative  area.  It  is  perfectly  apparent  that  the  first  proposi- 
tion came  from  Eastern  men  who  regarded  the  surplus  as  the 
product  of  duties,  while  the  second  is  no  less  apparently  the  sugges- 
tion of  Westerners  who  looked  upon  the  surplus  as  made  up  of 
the  proceeds  of  the  sales  of  public  lands.  Each  district  proposed, 
too,  a  method  by  which  it  might  get  more.  Jackson  defended 
his  plan  as  one  of  obvious  equity,  because  of  its  being  the  ratio  of 
contribution  whether  the  funds  were  derived  from  the  customs  or 
from  direct  taxation.  But  the  equity  is  not  at  all  obvious.  In 
I  the  first  place,  the  surplus  was  not  raised  by  direct  taxation  ;  and, 
'  secondly,  the  impost  duties  can  not  be  said  to  bear  upon  a  com- 

i   '  I  Statesman's  Manual,  705. 
^  "  I  Statesman's  Manual,  740-1. 


SURPLUS  REVENUE. 


munity  in  proportion  to  its  representative  population.  Jackson 
himself  acknowledged  later  the  unfairness  of  the  ratio.  Further- 
more, the  results  of  raising  a  revenue  by  imposts,  and  of  distributing 
it  by  any  ratio  based  upon  population,  would  be  very  different  in 
different  communities.  Take  South  Carolina  and  Pennsylvania 
in  old  times,  and  suppose  the  surplus  to  have  been  raised  by  a 
high  protective  tax  on  commodities  made  in  Pennsylvania.  The 
surplus  is  then  divided  on  a  ratio  of  direct  taxation  or  of  popula- 
tion between  the  two  States.  But  the  agricultural  State  has  paid 
a  tax  to  the  manufacturing  community  on  the  home-made  goods 
it  may  have  bought,  which  does  not  come  into  the  calculation. 
The  result  is,  roughly,  Pennsylvania  would  get  two  bounties  and 
pay  one.  Her  people  would  pay  part  of  the  imposts  and  get 
part  of  the  surplus  and  the  excess  of  price  on  their  commodities 
arising  from  protection.  South  Carolina,  on  the  other  hand,  would 
get  one  bounty  and  pay  two  ;  for  she  would  pay  impost  duties  to 
the  Government  and  a  tax  to  the  people  of  Pennsylvania,  and  she 
would  receive  her  share  of  the  surplus. 

In  a  measure  this  inequality,  would  have  been  balanced,  in  those 
times,  by  the  Southern  States  receiving  an  allowance,  on  the  basis 
of  direct  taxation,  upon  two  thirds  of  their  slaves.  If  the  sur- 
plus had  been  raised  by  direct  taxation,  its  division  among  the 
States  on  the  same  ratio  would  be  as  nearly  just  as  is  possible,  but 
the  justice  vanishes  if  the  money  is  divided  per  capita  or  among 
the  towns  afterward.  In  short,  there  is  no  conceivable  way  of 
collecting  taxes  and  distributing  the  proceeds  according  to  the 
contribution.  The  minute  such  a  method  were  discovered  it 
would  be  no  object  for  anybody  but  the  tax-gatherer,  an  unpopular 
minority,  to  propose  taxation. 

Jackson  henceforth  recommended  economy  and  reduction  of 
the  tariff,  and  his  annoyance  at  having  countenanced  distribution 
grew,  till  he  declared  that  his  views  had  so  changed  that  he  could 
give  no  sanction  whatever  to  any  such  scheme.^ 

The  seed,  however,  had  been  sown  and  was  now  springing  up. 
The  suggestion  of  Jackson,  or  of  Senator  Dickerson  was  reechoed 

'  In  Dec,  1836.     See  p.  20. 


lO  SURPLUS  REVENUE. 

in  1 83 1  by  the  Legislature  of  Pennsylvania,  which  passed  almost 
unanimously  a  resolution  in  favor  of  distribution.' 

The  first  notable  Congressional  discussion  of  these  projects 
came  up  in  the  spring  of  1832,  under  the  leadership  of  Henry 
Clay,  who  continued  to  advocate  the  distribution  of  land  revenues 
for  many  years. 

The  design,  at  bottom,  was  to  maintain  a  high  protective 
tariff,  but  this  was  very  difficult  to  accomplish  in  the  face  of  a 
fast  diminishing  debt  and  rapidly  increasing  land  revenues.  Clay, 
therefore,  devised  a  plan  to  distribute  the  land  revenues,  and  thus 
by  withdrawing  them  from  the  treasury  to  make  a  high  tariff 
necessary.  But  who  was  to  report  such  a  bill?  It  came  within 
the  duties  of  the  committee  on  public  lands,  of  course,  but  nothing 
could  be  hoped  from  that  body,  as  it  was  made  up  of  Senators 
from  the  new  States,  who  were  not  particularly  interested  in  the 
welfare  of  the  "American  System,"  and  were  probably  hostile  to 
the  scheme  in  question,  for  the  new  States  desired  the  cession  of 
the  public  lands  to  themselves.  This  difhculty,  however,  was 
cleverly  met  by  getting  a  resolution  passed,  under  the  color  of 
considering  a  revenue  bill,  that  the  Committee  on  Manufactures 
should  report  on  the  land  question.  This  cunning  device  did  not 
work,  for  though  the  Committee  on  Manufactures  responded, 
as  might  have  been  expected,'  with  a  report  and  a  bill  favoring  dis- 
tribution,^ it  was  all  so  clearly  out  of  place  that  the  Chairman  of 

1  Prof.  Thompson,  "Relief,"  etc.,  14. 

^  Four  out  of  five  of  tlae  committee  "were  known  to  be  devoted  advocatesof 
the  'American  System,'  "  while  the  Chairman  was  Mr.  Diclcerson,  who  had  pre- 
sented a  distribution  bill  in  1827.  Clay,  too,  was  a  leading  member  of  the 
committee.     (11  Benton's  Abridgment,  431.) 

*  The  chief  point  of  the  report  is  in  the  following  :  "  After  deducting  the  ten 
per  cent,  proposed  to  be  set  apart  for  the  new  States,  a  portion  of  the  committee 
would  have  preferred  that  the  residue  should  be  applied  to  the  olijects  of  in- 
ternal improvement,  and  colonization  of  the  free  blacks,  under  the  direction  of 
the  General  Government.  But  a  majority  of  the  committee  believes  it  better,  as 
an  alternative  for  the  cession  of  the  new  States,  and  as  being  more  likely  to  give 
general  satisfaction,  that  the  residue  be  divided  among  the  twenty-four  States, 
according  to  their  federal  representative  population,  to  be  applied  to  education, 
internal  improvement,  or  colonization,  or  to  the  redemption  of  any  existing  debt 


SURPLUS  REVENUE.  II 

the  Committee  on  Public  Lands  moved  that  the  bill  be  referred  to 
his  own  committee,  which  was  immediately  voted,  though  a 
majority  of  the  Senate  were  in  favor  of  the  bill/ 

The  Public  Lands  Committee  reported  against  the  measure.  It, 
however,  passed  the  Senate  after  much  debating,  but  was  killed  in 
the  House  by  a  small  majority.'' 

In  the  following  winter  Mr.  Clay  introduced  his  bill  again  ;  it 
passed  the  Senate  the  28th  of  January  by  a  vote  of  24  to 
20,  and  the  House,  with  some  amendments,  March  ist,  by  96  to 
40,  only  to  receive  a  pocket  veto  from  the  President.  This  he 
supplemented,  however,  with  a  special  veto  message  at  the  open- 
ing of  the  following  session.' 

Questions  of  greater  moment,  such  as  the  bank  war,  the  re- 
moval of  the  deposits,  and  the  relations  with  France,  now  arose 
to  push  distribution  for  a  time  into  the  background. 

contracted  for  internal  improvements,  as  each  State,  judging  for  itself,  shall 
deem  most  conformable  to  its  own  interests  and  policy." 

'  I  Benton,  275-76. 

"^  I  Benton,  279. 

'  See  I  Benton,  362-9. 


CHAPTER  II. 


THE    GROWTH    AND    DISPOSITION    OF    THE    SURPLUS. 

It  was  a  favorite  proposition  with  Mr.  Calhoun,  that  the  tariff 
of  1828  was  the  cause  of  the  surplus,  and  the  surplus  of  the  re- 
moval of  the  deposits,  whence  followed  the  disasters  in  the  cur- 
rency, which  befell  the  country  in  1837.  ' 

The  operation  of  a  high  tariff  in  making  a  surplus  is  clear 
enough,  but  there  was  a  secondary  influence  after  this  which 
vastly  increased  the  surplus  in  a  way  not  so  clear.  The  secondary 
influence  was  the  new  method  of  managing  the  public  deposits. 
When  the  Second  United  States  Bank  was  incorporated  in  1816, 
its  charter  provided  that  the  deposits  of  public  money  should  be 
kept  in  it,  or  its  branches,  unless  the  Secretary  of  the  Treasury 
should  direct  otherwise,  in  which  case  he  was  to  report  the 
reasons  of  his  action  to  Congress  as  soon  as  possible. 

Of  this  valuable  privilege  Jackson  resolved  to  deprive  the  bank. 
This  resolution  was  carried  through  with  all  his  characteristic  ob- 
stinacy and  recklessness,  and  the  execution  of  it,  with  the  attend- 
ant circumstances,  was  one  of  the  most  exciting  incidents  in  the 
history  of  American  politics. 
j  To  this  removal  ^  of  the  deposits  to  certain  chosen  and  favored 
\  banks  in  different  parts  of  the  country,  may  be  traced  the  source 
of  the  enormous  surplus  which  accumulated  in  1836. 

1  3  Calhoun's  works,  428-g. 

"  There  was  no  physical  removal.  Future  receipts  were  to  be  deposited  in 
the  chosen  banks,  and  the  deposits  in  the  United  States  Bank  remained  there 
till  drawn  out  for  ordinary  government  disbursements,  (i  Benton,  373.)  In  a 
speech,  April  27,  1836,  Mr.  Benton  said  :  "  No  part  of  the  revenues  of  1833  was 
ever  transferred  to  the  deposit  banks  ;  all  remained  in  the  Bank  of  the  United 
States  until  expended."  {50  Niles,  205.)  The  removal  is  fully  discussed  by 
Prof.  Sumner  :    "  Life  of  Jackson,"  297-321. 

12 


SURPLUS  KE VENUE.  1 3 

The  proceeds  from  the  sale  of  the  public  lands  were  the  largest 
item  in  the  Government  income,  after  the  customs.  Credit  on  these 
sales  was  withdrawn  between  1820  and  1832.' 

The  annual  income  from  this  source  averaged  2.3*  million  dol- 
lars in  the  ten  years  preceding  the  removal,  /.  e.,  from  1824  to  1833. 
The  excess  of  the  receipts  of  1833,  under  a  credit  system,  over 
those  of  1832  was  1.3  million  dollars.  In  1834  the  increase  was 
only  .9  million  dollars.  The  influence  of  the  deposits  had  not 
begun  to  be  felt,  because  they  had  not  accumulated  fast  since  the 
reduced  tariff  brought  in  12.8  million  dollars  less  revenue  than 
was  received  the  previous  year.  But  in  1835  the  effects  of  the  new 
deposit  system  appeared  ;  the  debt  had  been  paid,  and  "  an  im- 
mense amount  of  capital  was  being  collected  by  taxes,  and  this 
was  being  distributed  to  favored  corporations,  as  a  free  loan  for 
an  indefinite  period,  on  which  they  could  make  profits  by  lending 
at  interest."  '  Furthermore,  these  favored  corporations  were  en- 
couraged by  the  administration  to  extend  their  accommodations  so 
that  people  might  not  miss  the  help  of  the  United  States  Bank, 
which  narrowed  the  range  of  its  operations  on  the  removal  of  the 
deposits. 

The  extraordinary  privileges  which  the  "pet  banks"  enjoyed' 
were  eagerly  sought  for,  and  frequently  granted  as  rewards  for 
political  services.* 

'  Wirth,  145. 

^  Five  figures  omitted. 

*  Prof.  Sumner's  Jackson,  319. 

^  For  example  :  The  pet  Commercial  Bank  of  Cincinnati  did  a  discount 
business  of  nearly  $4,000,000.  It  had  $1,000,000  capital  and  $2, 500,000 /«3//<; 
money.  From  auditor's  report  from  Cincinnati  Gazette,  in  Nezo  York  Spectator, 
April  7,  1837. 

'  See  the  letters  in  52  Niles,  91-3.  To  take  an  example  :  The  president 
of  the  Seventh  Ward  Bank,  in  New  York,  offered  the  services  of  the  bank  to 
the  Secretary  of  the  Treasury,  October  2,  1833.  The  letter  contained  the 
following:  "The  directory  feel  much  confidence  in  this  application,  being 
(without  exception),  as  well  as  the  stockholders,  with  few  exceptions,  friends  of 
the  administration."  ..."  The  directors,  having  the  highest  personal 
consideration  for  General  Jackson,  respectfully  request  the  Secretary  to  lay  this 
letter  before  the   President."     This  ofifer  was  not    accepted,    whereupon,  De- 


14  SURPLUS  REVENUE. 

There  is  no  question  that  this  tempting  bait  was  used  to 
strengthen  the  hold  of  the  administration  on  the  Government. 
New  banks  sprang  up  everywhere  to  partake  of  the  good  things. 
The  banking  capital  of  the  country  in  1820  was  $102,100,000  ; 
in  1830,  $110,000,000  ;  in  1834,  $196,250,000  ;  and  in  1836, 
August,  $281,250,000.' 

The  payment  of  the  public  debt  left  foreign  capital  seeking 
investment,  and  at  the  same  time  raised  American  credit  to  a 
high  place  ;  consequently  much  of  the  foreign  capital  was  put 
into  state  stocks.''  This  made  money  cheap  and  plenty,  besides 
inciting  the  States  to  contract  debts  for  internal  improvements. 
'  In  the  West  particularly  the  banks  which  received  deposits 
sought  to  loan  them  on  easy  terms,  and  so  men  found  no  trouble 
in  borrowing.  The  new  banks,  at  the  same  time,  were  putting 
out  notes  with  great  recklessness.'  These  two  influences  worked 
together  to  excite  a  fever  of  speculation.  The  improvement 
scheme  would  raise  land  values  ;  but  the  public  lands  sold  for 
the  fixed  sum  of  $1.25  per  acre,  no  matter  how  high  the  market 
price  of  other  land  rose. 

Consequently  everybody  who  could  borrow  money  bought 
public  lands  to  sell  again  at  the  market  value,  or  to  hold  for  a 
further  rise.*     In  this  way  the  deposits  were  borrowed,  paid  over 

cember  16,  1S33,  the  president,  cashier,  and  twelve  directors  sent  the  following, 
signed  with  their  names  :  "  We,  the  subscribers,  officers,  and  directors  of  the 
Seventh  Ward  Bank,  in  the  city  of  New  York,  friends  of  the  administration, 
and  of  the  revered  chief  at  the  head  of  the  Government,  do  solicit  a  portion  of 
the  fiscal  patronage  of  the  United  States  Treasury  for  the  Seventh  Ward  Bank. 
The  terms  are  those  most  favorable  to  the  Government."  This  appeal  was 
successful. 

^  51  Niles,  162. 

"^ E.  g.  :  In  1842  the  debt  of  Pennsylvania  was  $34,454,356.47,  of  which 
$23,738,206  was  held  abroad. — 62  Niles,  332. 

^  Abbot  Lawrence,  in  March,  1837,  estimated  that  since  the  veto  of  the  bill 
to  renew  the  charter  of  the  U.  S.  Bank  in  1S32  there  had  been  an  increase  of 
bank  notes  in  circulation  of  $80,000,000. — 52  Niles,  89. 

*  "  A  gentleman  purchases  land  at  $1.25,  or  more,  per  acre,  returns,  repre- 
sents it  a  first  quality,  and  counts  it  worth  from  $10  to  $15  or  $20.  Multi- 
plying the  number  of  acres  by  this  amount,  he  finds  out  his  real  wealth,  and 


SURPLUS  REVENUE.  I  5 

to  the  land  receiver  for  land,  to  be  by  him  deposited  in  the  banks  ; 
then  the  operation  was  repeated  again  and  again,  the  growing 
surplus  consisting  of  bank  credits  mainly.' 

Under  this  deceptive  process  the  land  sales  rose  from  an  aver- 
age of  $2,300,000  a  year  to  114,757,600  in  1835,  and  in  1836  to  the 
unparalleled  amount  of  124,877,179  !  All  this  time  speculation  in 
other  things  besides  lands,  feeling  the  contagion,  went  on  wildly, 
fancy  stocks  were  put  on  the  market,  city  lots  rose  enormously  in 
value,  and  money  was  drawn  out  of  slow-goingenterprises.  The  rise 
of  prices  here  increased  importations  of  all  kinds,  even'of  provisions.* 

the  amount  so  produced  stands  good  for  credit  equal  to  it;  an  endorser  is  easily 
found,  for  in  these  speculating  times  dependencies  are  mutual,  and  the  bank 
looses  its  purse  strings.  The  investment  is  made  as  soon  as  possible.  The 
money  thus  obtained  cannot  be  refunded.  Land  will  not  sell,  and  if  sold,  the 
depreciation  in  value  prevents  its  realizing  the  estimate.  In  this  way  is  the 
ruin  of  many,  no  doubt,  involved,  and  the  banks  must  meet  with  heavy  losses." 
— The  Richmond  Compiler  in  the  N'ezv  Haven  Register,  May  13,  1837. 

'  "The  facility  of  purchasing  was  not  less  than  the  quantity  to  be  purchased 
(about  200,000,000  acres).  The  deposits  of  the  Government  in  the  State  banks 
selected  as  its  fiscal  agents  were  upwards  of  forty  millions  of  dollars  [this 
estimate  is  a  little  too  high  probably,  except  toward  the  last.  October  i,  1835, 
the  deposits  amounted  to  $18,000,000,  and  October  i,  1836,  to  $41,000,000], 
consisting  almost  exclusively  of  bank  notes.  From  this  vast  source  speculators 
and  political  partisans  drew  their  funds,  in  the  form  of  discount  or  loan,  in 
exchange  for  which  they  gave  their  own  promissory  notes,  and  received  the 
notes  deposited  by  the  Government,  or  what  was  the  same,  a  credit  in  bank 
founded  on  them.  These,  in  turn,  were  exchanged  for  public  lands,  when  they 
passed  into  the  hands  of  the  receivers,  and  were  by  them  returned  to  the  banks 
as  new  deposits,  to  take  the  same  rapid  round  again  and  again,  and  sweeping 
away  from  the  people,  by  means  of  their  own  funds,  a  corresponding  amount  of 
their  land,  and  swelling,  in  the  same  proportion,  the  amount  brought  to  the 
credit  of  the  Government  by  the  banks,  under  the  fallacious  name  of  public 
money  in  the  treasury,  but  which  in  reality  was  nothing  more  than  the  notes  in 
bank  given  by  speculators  and  partisans  in  exchange  for  the  public  lands." — 
Anonymous  "  Life  of  J.  C.  Calhoun,"  p.  56,  Calhoun  himself  gave  a  rapid 
and  vivid  survey  of  this  period,  and  of  this  process,  in  his  speech  of  February  5, 
1840,  3  Works,  428-9.  See  also  Mackenzie's  "Van  Buren,  136  (note)  ;  Jack- 
son's Message,  Dec,  1836,  51  Niles,  235  ;  Von  Hock,  424-5.  and  50  Niles,  351. 
"^  "  For  a  series  of  many  years  the  value  of  the  grain  and  flour  imported  did  not 
exceed  a  few  thousand  dollars,  while  that  exported  was,  on   an  average,    quite 


1 6  SURPLUS  REVENUE. 

The  revenue  from  customs  was  $16,200,000  in  1834,  $19,400,- 
000  in  1835,  and  $23,400,000  in  1836,  a  higher  figure  than  was 
reached  again  till  1844,  after  the  tariff  was  raised.  March  i,  1836, 
the  surplus  on  deposit  amounted  to  $33,700,000,'  and  by  June  ist 
it  had  risen  to  $41,500,000.'^  The  further  inflation  of  this  credit 
surplus  ^  was  stayed  by  the  specie  circular  which  took  effect  Au- 
gust 15th,  so  that  on  the  first  of  January,  1837,  the  actual  surplus 
was  $41,468,859.97.' 

From  these  considerations  it  appears  that  the  verdict  of  a  con- 
temporary writer,  that  there  would  have  been  no  surplus  had  there 
been  no  removal  of  the  deposits,  has  very  strong  grounds  of  proba- 
bility in  its  favor.  It  would  perhaps  be  too  much,  though,  to  ac- 
cept this  statement  without  a  little  modification.  To  quote  his 
own  words  :  "  had  the  deposits  not  beeti  removed  there  could  have 
been  no  surplus  revejiue.  It  was  the  act  of  sending  part  of  those 
deposits  to  the  Western  States  which  furnished  the  means  for  the 
first  speculations  in  public  lands.  The  public  money  was  lent  to 
persons  to  buy  lands  with,  and  the  same  identical  money,  being 
returned  to  the  deposit  banks  by  the  receivers,  was  loaned  over 
and  over  again,  until  the  amount  was  upward  of  forty-four  mil- 
lions of  dollars  in  three  years,  being  seven  millions  more  [really  $16,- 
000,000  more]  than  the  amount  distributed  amongst  the  States."  ^ 

To  give  another  exa'mple  of  the  extent  of  this  speculative  buy- 

$6,oco,ooo.  Sometimes  it  exceeded  even  $14,000,000,  and  so  late  as  1833,  '4,  and 
'5,  amounted  to  nearly  $5,000,000  annually.  But  in  the  year  ending  September 
30,  1837,  the  exports  of  grain  fell  off  nearly  a  million,  while  the  imports  were 
augmented  in  value  to  the  unprecedented  amount  of  more  than  four  and  a  half 
millions."  See  Woodbury's  Report,  Dec.  5,  1837  ;  53  Niles,  242.  Between 
January  i  and  April  19,  1837,  851,000  bushels  of  wheat  were  imported. — 52 
Niles,  147. 

'  50  Niles,  91.  ^  50  Niles,  313. 

^  The  term  "  credit  surplus,"  used  above,  is  authorized  specifically  by  the 
chairman  of  a  legislative  committee  in  South  Carolina,  organized  to  report  on 
Independent  Treasury.  He  referred  to  the  late  surplus  as  one  "  consisting  of 
bank  credits." — 55  Niles,  310.  ■*  51  Niles,  289. 

*  "An  Examiner"  in  the  National  Gazette,  April  29,  1837. — i  Financial 
Register,  146.  The  fact  that  Raguet  reprinted  this  series  of  articles  is  a  testi- 
mony to  their  trustworthiness.     See  Appendix  of  this  work. 


SURPLUS  REVENUE.  1/ 

ing  :  in  Michigan  the  sales  in  1836  exceeded  $5,000,000,  but  in 
1838  they  amounted  to  only  1154,284  ;  in  Mississippi,  in  1835  and 
1836,  the  receipts  exceeded  $3,000,000  each  year,  but  in  1838  they 
fell  to  %C)(>,6i(i.^  It  is  worth  remarking  that  the  ratio  between  the 
receipts  in  these  two  States  is  the  same  in  both  periods.  It  will 
be  noted  further  on  that  when  the  distribution  took  place  the  de- 
posits were  not  forthcoming  from  Michigan  and  Mississippi, 
because  the  banks  could  not  collect  their  loans. 

During  1835  and  the  first  part  of  1836  the  opposition  party 
looked  with  alarm  at  the  growing  surplus  of  many  millions  of  dol- 
lars kept  in  administration  banks,  which  had  the  use  of  the  capital 
for  nothing. 

The  opposition  perceived  that  the  system  was  exciting  wild 
speculation,  and  that  by  it  money  was  drawn  from  the  great  com- 
mercial centres  and  stored  in  remote  banks  to  be  loaned  to 
the  profit  of  those  who  had  proved  their  loyalty  to  the  administra- 
tion and  its  "  revered  chief."  The  Whigs  felt  they  had  no  hopes 
of  gaining  an  election  against  such  odds^  ;  what  was  to  be  done, 

1  Woodbury's  Report,  January,  1840. 

''Mr.  Ewing,  of  Ohio,  said  in  a  speech  in  the  Senate,  March  17,  1836  :  "  I 
could  not  but  be  struck,  and  forcibly,  with  the  perfect  control  which  the  Execu- 
tive has,  if  he  see  fit  to  exercise  it,  over  all  these  banks,  and  with  them,  also,  over 
the  whole  long  list  of  directors,  stockholders,  and  debtors.  Of  the  thirty-five 
banks  in  which  the  public  money  is  deposited,  there  are  but  eight  which  could 
not  be  crushed  at  once,  if  the  public  deposits  should  be  at  once  withdrawn  from 
them.  There  are  twenty-seven  of  them  that  could  not  pay  the  amount  of  those 
deposits  on  demand,  even  if  no  other  creditor  should  call  on  them.  They  are 
fettered,  bound  by  a  golden  chain,  the  ring  of  which  is  in  the  hands  of  the  Secre- 
tary of  the  Treasury.  They  could  not,  and  they  dare  not  move  contrary  to  his 
bidding,  if  he  see  fit  to  direct  them  to  any  end  or  object." — 50  Niles,  119. 

In  this  session  a  committee,  consisting  of  Calhoun,  Webster,  Benton,  Bibb, 
Southard,  and  King,  considered  the  surplus  question.  It  assumed  there  would  be 
a  surplus  of  nine  millions  a  year  for  the  next  eight  years,  and  to  dispose  of  this 
surplus  they  proposed  an  amendment  of  the  Constitution  authorizing  the  distri- 
bution of  the  yearly  surplus  on  the  basis  of  representation.  This  proposition  was 
never  brought  to  a  vote.  Benton,  as  the  leader  of  the  administration  in  the  Sen- 
ate, opposed  it,  as  was  natural,  for  it  was  a  blow  aimed  at  the  increasing  power 
of  the  administration  coming  from  the  support  of  the  pet  banks.  For  a  fuller 
notice  of  this  report  see  Knox,  175-6. 


V/cstminster  Odd  Fellows' 

Free  Library  and  Reaa-.^oom   • 


WESTy,lNSTER,  CALlFORNm 


I  8  SURPLUS  REVENUE. 

for  something  must  be  done  right  quickly  ?  January  27,  1836, 
Mr.  Ewing,  for  the  Committee  on  Public  Lands,  reported  in  favor 
of  distributing  the  proceeds  of  the  land  sales  among  the  States,  for 
a  limited  time,  to  be  devoted  to  education,  internal  improvements, 
etc.  There  was  too  much  revenue,  and  the  best  plan  was  to  give 
it  back  to  the  people.' 

Clay  brought  forward  a  land  bill  which  set  apart  ten  per  cent,  of 
the  net  proceeds  of  the  land  sales  for  the  ten  new  States,  and  pro- 
vided for  the  distribution  of  the  residue.^  Calhoun,  who  was  in 
opposition,  presented  a  joint  resolution  for  an  amendment  to  the 
Constitution  sanctioning  distribution, ^and  also  a  bill  to  regulate  the 
public  deposits.  A  distribution  bill  was  introduced.  Mr.  Benton 
favored  spending  the  money  on  fortifications  ;  for  the  administra- 
tion did  not  relish  the  effects  of  the  surplus  and  the  responsibilities 
it  entailed.  Silas  Wright  thought  it  would  be  a  good  plan  to  buy 
State  stocks  with  the  surplus.  Mr.  Grundy  introduced  a  bilP  to 
use  it  to  secure  for  the  Government  the  freedom  of  the  railroads — 
/.  e.,  free  transportation  of  mails,  munitions  of  war,  etc.,  forever- 
Nobody  of  importance  suggested  a  reduction  of  the  tariff,  because 
the  compromise  bill,  which  was  working  slowly,  was  regarded  as 
the  settlement  of  that  question  for  some  years  to  come,  and  it 
must  not  be  interfered  with.  In  fact,  many  looked  upon  it  as 
a  sort  of  temporary  appendix  to  the  Constitution,  and  conse- 
quently sacred.  Furthermore,  most  of  the  opposition  were  protec- 
tionists. But  perhaps  the  chief  reason  was  that  it  was  the  vicious 
deposit  system  and  not  the  tariff  which  was  working  the  mischief. 

The  land  bill  after  passing  the  Senate,  May  4th,  by  a  vote 
of  25  to  20,  was  laid  upon  the  table  by  the  House,  104  to  85, 
June  22d.  Through  Webster's  ^  influence  the  Senate  committee 
added  a  clause  to  the  deposit  bill  providing  for  the  division 
among  the  States,  according  to  population,  of  the  excess  of 
the  revenue  above,  some  amount  thereafter  to  be  reserved, 

^  50  Niles,  I  and  12.       The  surplus  at  this  date  exceeded  thirty  millions. 
^  March  25th,  the  lower  house  of  the  General  Assembly  of  New  York  passed 
a  resolution  in  favor  of  the  distribution  of  the  land  revenue. — 50  Niles,  118. 
'  See  note  2  on  p.  17. 
^  50  Niles,  83.  *  50  Niles,  235. 


SURPLUS  REVENUE.  1 9 

The  bill  was  thus  amended  and  passed  the  Senate,  June  17th. 
On  the  20th  it  was  considered  in  the  House,  and  an  attempt  was 
made  to  break  it  up  into  two  bills  ;  one  for  the  regulation  of  the 
deposits,  and  one  for  the  distribution  of  the  surplus,  but  without 
avail.  It  was  then  made  the  order  of  the  day  until  it  should 
be  disposed  of.  After  many  hours  of  debate  on  the  21st  the  dis- 
tribution clause  was  stricken  out,  and,  on  the  motion  of  Mr. 
Anthony,  of  Pa.,  a  clause  inserted  in  its  place,  making  the  States 
merely  the  depositaries  of  the  surplus,  which  should  be  subject  to 
the  demands  of  the  Treasury  ;  and  changing  the  ratio  of  division 
from  the  ratio  of  population  to  the  ratio  of  representation  in  Con- 
gress. In  this  shape  the  bill  passed,  155  to  38.  The  Senate  imme- 
diately accepted  the  amendments,  and  the  President  signed  the 
bill  on  the  23d  of  June.^ 

'  Two  days  later  Webster  wrote  :  "  The  deposit  and  distribution  bill  has  be- 
come a  law,  and  money  is  already  getting  to  be  much  easier,  as  the  phrase  is." — 
2  Webster's  Correspondence,  21^ 

The  following  is  the  text  of  the  13th  section  of  the  Deposit  Bill  :  ''And  be  it 
further  enacted.  That  the  money  which  shall  be  in  the  Treasury  of  the  United 
States  on  the  first  day  of  January,  1S37,  reserving  the  sum  of  five  millions  of  dol- 
lars, shall  be  deposited  with  the  several  States,  in  proportion  to  their  respective 
representation  in  the  Senate  and  House  of  Representatives  of  the  Congress 
of  the  United  States  ;  and  the  Secretary  of  the  Treasury  shall  deliver  the 
same  to  such  persons  as  the  several  States  may  authorize  to  receive  it,  on  receiv- 
ing certificates  of  deposit,  signed  by  the  competent  authorities  of  each  State, 
each  for  such  amount  and  in  such  form  as  the  Secretary  of  the  Treasury 
may  prescribe,  which  shall  set  forth  and  express  the  obligation  of  the  State 
to  pay  the  amount  thereof  to  the  United  States,  or  their  assigns  ;  and  which  said 
certificates  it  shall  be  competent  for  the  Secretary  of  the  Treasury,  in  the  name 
and  behalf  of  the  United  States,  to  sell  and  assign,  whenever  it  shall  be  neces- 
sary, for  want  of  other  money  in  the  Treasury,  to  meet  appropriations  made  by 
Congress,  all  sales  and  assignments,  however,  to  be  ratable,  and  in  just  and  equal 
proportions,  among  all  the  States,  according  to  the  amounts  received  by  them 
respectively  ;  and  all  such  certificates  of  deposit  shall  be  subject  to,  and  bear  an 
interest  of  five  per  centum  per  annum,  payable  half-yearly,  from  the  time  of 
such  sale  and  assignment,  and  shall  be  redeemable  at  the  pleasure  of  the  States 
issuing  the  same." 

The  14th  section  prescribed  that  the  deposits  were  t8  be  made  in  four  instal- 
ments, one  quarter  January  ist,  April  1st,  July  1st,  and  October  ist  respec- 
tively.— 50  Niles,  291. 


20  SURPLUS  REVENUE. 

There  is  no  doubt  that  Jackson  would  liave  vetoed  a  distribu- 
tion bill.  The  Globe  said  so/  and  his  criticisms  of  the  act  showed 
that  he  was  dissatisfied  with  it  as  it  stood. 

Indeed,  his  mind  had  undergone  a  thorough  change  on  the  sub- 
ject. He  declared  in  his  message  of  Dec,  1836,  that  his  first  two 
messages  had  been  misunderstood  ;  he  had  wanted  to  discourage 
loose  construction  and  big  appropriations  for  internal  improve- 
ments, at  a  time  when  duties  could  not  be  reduced  without  exten- 
sive mischief,  while  great  evils  attended  keeping  the  surplus  in  the 
Treasury.  He  had  suggested  an  amendment  to  the  Constitution  to 
authorize  distribution  as  an  alternative  for  what  were  deemed 
greater  evils,  as  a  temporary  resort  to  relieve  an  overburdened 
Treasury,  till  without  commercial  disturbance  the  Government 
could  return  to  raising  revenue  just  sufficient  for  its  support. 

Even  this  had  not  been  proposed  as  advisable  without  a  consti- 
tutional amendment.  He  now  considered  distribution  of  surpluses 
as  prohibited  by  the  Constitution  ;  his  opinion  had  changed  till 
he  did  not  approve  of  an  amendment  at  all.  The  whole  thing 
was  bad,  worse  than  any  transient  mischief  coming  from  lowering 
duties.^ 

'  50  Niles,  281. 

"51  Niles,  234.  In  the  message  he  argues  very  fully  and  strongly  against  dis- 
tribution and  against  the  deposit  bill. 


CHAPTER  III. 

THE    DIFFERENT    OPINIONS    OF    THE    MEASURE. 

There  can  be  no  question  legally  that  this  act  of  June  23d  was 
to  be  interpreted  as  merely  a  temporary  deposit  of  the  surplus 
with  the  States  ;  such  is  the  wording  of  the  act  and  such  has  been 
the  decision  of  the  Supreme  Court,"  yet  the  distributionists  then 
and  afterward  regarded  it  as  a  substantial  victory,  and  their 
opinion  has  so  far  prevailed  that  ordinarily  the  surplus  is  far  more 
often  said  to  have  been  distributed  than  deposited  in  1837.  Many 
States,  indeed,  continued  for  several  years  to  count  the  deposit 
among  their  liabilities,  though  oftentimes  with  the  remark  that  it 
probably  would  never  be  called  for.  Mr.  Clay  told  his  fellow- 
citizens,  on  his  return  to  Kentucky,  that  he  "did  not  believe  a 
single  member  of  either  house  imagined  that  a  dollar  would  be  re- 
called." '  In  1841  he  reiterated  this  belief  more  emphatically.^ 
On  the  other  hand,  Calhoun  (1841)  affirmed:  "I  regarded  it 
then  (1836),  and  still  do,  as  simply  a  deposit — a  deposit,  to  say  the 
least,  as  constitutional  as  that  in  Stale  banks  or  State  stocks  held  by 
speculators  and  stock  jobbers  on  both  sides  of  the  Atlantic,  and  far 
more  just  and  appropriate  than  either.     But  while  I  regard  it  as  a 

1  See  p.  43.  '^  51  Niles,  14. 

'  "  The  Senator  from  New  York  has  adverted,  for  another  purpose,  to  the 
twenty-eight  millions  of  surplus  divided  a  few  years  ago  among  the  States.  Was 
not  that,  in  effect,  distribution  ?  Was  it  not  so  understood  at  the  time  ?  Was 
it  not  voted  for  by  Senators  as  practical  distribution  ?  The  Senator  from  North 
Carolina  (Mr.  Mangum)  has  stated  that  he  did.  I  did.  Other  Senators  did  ; 
and  no  one,  not  the  boldest,  will  have  the  temerity  to  rise  here  and  propose  to 
require  or  compel  the  States  to  refund  that  money.  If  in  form  it  was  a  deposit 
with  the  States,  in  fact,  and  in  truth,  it  was  distribution.  So  it  was  then  re- 
garded. So  it  will  ever  remain." — Speech  of  January  28,  184  ;  6  Clay's 
Works,  248. 

21 


22  SU2?FLUS  REVENUE. 

deposit,  I  did  then,  and  now  do,  believe  that  it  should  never  be  with- 
drawn but  in  the  event  of  war,  when  it  would  be  found  a  valuable 
resource."  '  Others  asserted  that  the  bill  provided  for  a  deposit, 
rather  than  for  a  distribution,  only  to  avoid  a  presidential  veto.' 

On  the  question  whether  it  was  constitutional  to  distribute  the 
surplus  revenue  or  to  raise  revenue  for  distribution,  the  Whig 
position  was  that  the  existing  surplus  was  not  raised  by  taxation 
and  was  not  properly  revenue,  but  the  property  of  the  people, 
which  should  be  given  to  them.  If  the  Government  needed  the 
money  it  might  use  it  ;  otherwise  the  money  should  be  paid  to  its 
rightful  owners,  the  people.' 

These  ideas  are  illustrated  by  the  attitude  of  the  party  news- 
papers. 

The  opposition  press  rejoiced  at  their  victory,  as  they  deemed 
it,  prophesied  that  the  money  would  never  be  recalled  because 
it  was  the  "  people's  money,"  '  or  because  the  States  '  would 
not  give  it  up.  They  pronounced  any  man  who,  for  party  reasons, 
could  vote  against  a  bill  which  brought  so  much  money  into  the 

'  Speech  of  Jan.  23,  1841  ;  3  Calhoun's  Works,  581. 

^  It  cannot  be  denied  that  when  the  distribution  was  made,  it  was  well  under- 
stood by  Congress  that  the  form  of  a  deposit  was  adopted  only  to  save  the  bill 
from  the  veto  of  the  Federal  Executive.  Nor  is  it  less  apparent  that  the  several 
Legislatures,  in  disposing  of  the  funds  deposited,  by  no  means  contemplated  a 
contingency  in  which  they  should  be  repaid  to  the  General  Government." — Gov. 
Seward's  Message,  Jan.,  1841. 

He  asked  if  the  people  of  New  York  were  going  to  withdraw  from  educa- 
tional purposes  four  million  dollars,  to  pay  into  a  treasury  which,  if  well  man- 
aged, overflowed  with  the  tribute  of  their  own  commerce. — 2  Seward's  Works, 
267  ;  4  Hazard,  36. 

^  Hartford  Courant,  in  New  Haveji  Herald,  March  13,  1S37. 

*  "  It  is  the  people's  money,  and  the  Government  will  never  ask  for  it." — 
Nc7v  Haven  Palladium,  Dec.  3,  1836. 

^  "  We  abjure,  however,  the  idea  that  the  National  Government  ever  will,  or 
can,  effectually  call  for  its  return — a  fact  which  is  so  palpable  in  itself  that  a 
motion  has  already  been  made  in  Congress  to  divest  the  question  of  any  kind  of 
doubt,  (See  page  29.)  The  idea  is  ridiculous  that  it  can  ever  be  returned  in  a 
mass." 

If  all  the  States  were  called  upon,  they  would  not  all  act,  an  inequality  with- 
out remedy. — Nezv  Haven  Herald,  Dec.  15,  1836. 


SURPLUS  REVENUE.  23 

State,  politically  depraved/  and  declared  that  the  country  was 
deeply  indebted  to  Webster  and  the  Whigs.* 

Some  papers  asserted  that  the  only  reason  why  the  administra- 
tion, and  especially  Van  Buren,  the  coming  President,  disapproved 
of  distribution  was  because  it  took  money  out  of  their  control  that 
they  wanted  for  political  managing  and  electioneering  purposes." 
On  the  other  hand  the  Giol'e  claimed  the  credit  of  the  deposit 
bill  for  the  administration  in  the  early  part  of  1837,  a  claim  which 
the  opposition  papers  refused  to  allow  at  all,  and  which  the  Globe 
abandoned  as  soon  as  some  evil  effects  of  the  measure  began  to 
appear. 

But  notwithstanding  the  heat  of  these  newspaper  discussions  we 
are  constrained  to  believe  that  there  was  no  lively  popular  feeling 
on  the  subject.''  While  the  politicians  and  the  press  wrangled  as 
to  who  should  receive  the  credit  of  having  benefited  the  country, 
the  people  took  no  interest  in  their  rival  claims,  and,  so  far  as  the 
measure  may  have  been  calculated  for  winning  political  capital,  it 
must  have  been  unsucessful.  Before  we  criticise  the  deposit  bill 
too  harshly  or  show  that  it  failed  to  satisfy  the  expectations  it 

^  The  bill  "  will  bring  into  this  State,  at  the  lowest  calculation,  $496,000; 
at  the  highest,  $544,000.  A  Senator  or  Representative  who  could  bring  himself 
for  mere  party  grounds  to  vote  against  a  proposition,  the  result  of  which  must 
be  so  favorable  to  the  most  important  interests  of  his  constituents,  must  have 
been  far  gone  in  political  hardihood  as  well  as  depravity." 

Cotin.  (Hartford)  Cotirant,  June  27,  1836.  "  The  country,"  it  said,  "  is  in- 
debted to  the  public  spirit,  clear  discernment,  and  distinguished  talents  of  the 
Hon.  Mr.  Webster,  of  Mass." 

^  "  We  are  well  aware  that  the  Tory  Democrats  have  fought  against  the  meas- 
ure of  distributing  the  surplus  among  the  people,  so  long  as  they  thought  it  of 
any  avail,  and  that  to  the  Republican-Whig  Party  alone  are  the  States  indebted 
for  the  benefits  arising  from  the  distribution  of  the  accumulated  millions  in  the 
National  Treasury  of  the  hard  earnings  of  the  laboring  classes."—  Bn'ifge/ort 
Republican,  in  the  New  Haven  Palladium,  Jan.  28,  1837. 

^  Conn,  Coiirani,  Dec.  14,  1836,  and  N.  H.  Herald,  March  20,  1837. 

^  "  The  public  feeling  is  scarcely  enlisted  yet  in  support  of  our  noble  and  just 
measure  of  distributing  the  public  revenue.  People,  seem  so  far  as  they  fall 
within  my  observation,  to  be  unconcerned,  as  if  entirely  ignorant  on  the  sub- 
ject."—Letter  from  W.  H.  Seward,  Sept.  8,  1836,  from  Westfield,  N.  Y.,  where 
he  was  a  land  officer.      Life  of  Seward,  307. 


24  SURPLUS  REVENUE. 

raised,  let  us  look  at  the  predicament.     Private  corporations  were 
using  Government  deposits  as  capital  for  their  own  profit ;  this 
great  privilege   was  a  reward  for  party  services  ;  the  wide  and 
powerful  influence  exerted  in  favor  of  the  administration  by  this 
system  aroused  the  Whigs  from  mere  party  motives,  if  for  no  other 
reason,  to  put  a  stop  to  such  abuses.    At  the  same  time  it  was  not 
simply  a  case  of  unfair  use  of  advantages  seized  in  an  unfair  and 
despotic  way,   but  the   policy  was  exceedingly  disastrous   com- 
mercially and  socially  ;  all  monetary  relations  were  disturbed  by 
arbitrary  apportionments  of  the  capital  of  the  country  and  wild 
speculation  was  undermining  the  solid  basis  of  industry.      Every 
one  felt  that  something  must  be  done.     Tariff  revision  was  im- 
practicable.    Mr.  Benton  proposed,  without  success,  to  require  all 
payments  for  public  lands  to  be  made  in  specie  ;  this  touched  the 
heart  of  the  difficulty,  it  would  check  the  growth  of  the  surplus, 
but   it   would   not   remove  the   money  from   the  control  of  the 
administration,  a  vital  point  with  the  opposition.     All  that  this 
could  have  done  was  done  later  by  the    "  specie  circular,"  '  an 
heroic  measure  which  struck  at  the  root  of  the  disease,  but  the 
shock  of  whose  execution  hastened  a  crisis.     Investment  of  the 
money  in  the   swollen    issues  of   State   stock   would   have   been 
to  throw  it  away,  and  at  the   same  time  to  tempt  the  States  to 
further  issues.    Webster  regarded  the  deposit  bill  as  a  necessity  to 
prevent    the    accumulation    of    revenue  ;    building    fortifications 
would  not  do  all  ;  he  should  vote,  he  said,  for  every  part  and 
parcel  of  the  fortification  bill,  yet  he  was  sure  it  would  not  absorb 
the  revenue  ;  internal  improvements  could  not  absorb  it,  for  these 
useful  channels  were  blockaded  by  vetoes.    How  then  was  it  to  be 
disposed  of  P'^ 

Calhoun  maintained  that  it  was  highly  dangerous  to  make  way 
with  the  surplus  by  increased  expenditures,  but  more  dangerous 
still  to  leave  it  "  in  the  custody  of  a  few  monopolizing  corpora- 
tions," selected  by  the  Executive,  which  used  the  money  as  their 
own  while  it  was  in  their  possession.    This  arrangement  placed  an 

'See  p.  27. 

"Speech,  March,  17,  1836;  4  Webster's  works,  236. 


SURPLUS  REVENUE.  25 

overwhelming  power  in  the  hands  of  those  who  controlled  the 
Government,  He  could  not  favor  buying  State  stocks.  The 
deposit  probably  would  not  be  recalled  except  perhaps  in  time  of 
war.  Tlie  Electoral  basis  favored  the  smaller  States,  which  he 
wanted  to  do.  Depositing,  in  short,  would  avoid  national  ex- 
travagance ;  would  avoid  diverting  so  much  capital  to  unpro- 
ductive enterprises  ;  and  would  enable  the  States  to  discharge 
their  debts  and  finish  their  internal  improvements.' 

It  was  under  the  pressure  of  such  feelings  that  Congress  passed 
the  bill  The  act  was  a  makeshift.  It  was  not  wholly  satisfactory 
to  the  Whigs,  who  wanted  distribution.  Some  of  the  States  of  the 
free-trade  South  received  their  shares  with  protests,  and  received 
them  only  because  if  they  refused  the  North  would  get  them  ; 
others  regarded  the  money  as  a  slight  return  for  the  iniquitous 
exactions  of  the  tariff,  but  not  to  be  despised  though  slight. 
Generally  those  States  looked  upon  the  deposit  as  a  sop  thrown 
them  by  the  protectionists,  while  a  few  of  them  proudly  asserted 
that  they  could  support  themselves  and  were  not  dependent  upon 
the  General  Government.  Though  their  feelings  were  bitterly 
expressed,  they  are  an  honorable  contrast  to  the  insatiable  greed 
manifested  in  some  quarters.  The  administration  disliked  the  act, 
but  felt  constrained  to  sanction  it.  But  in  spite  of  its  unsatisfac- 
tory nature,  and  in  spite  of  its  unhappy  effects  in  some  cases,  it  is 
difficult  to  suggest  any  thing  better.  The  act  was  preferable  to 
pure  distribution,  though  it  degenerated  to  that  in  some  instances. 
The  verdict  must  be  that  the  country  was  in  a  sad  plight :  reckless 
financial  dissipation  had  had  its  effect ;  disease  had  so  fastened 
upon  the  commercial  body  that  there  was  no  way  to  health  or 
improvement  except  by  a  surgical  operation.  The  operation  was 
clumsy,  because  it  was  the  first  of  its  kind  ever  performed  ;  it  was 
painful,  because  the  disease  was  strongly  rooted  ;  it  was  injurious, 

*  Speech  of  May  28,  1S36  ;  2  Calhoun's  works,  534-68.  It  will  not  be 
anticipating  too  much  to  remark  that  "depositing"  was  no  real  safeguard 
against  the  evils  mentioned  in  the  last  sentence,  for  it  encouraged  State  ex- 
travagance, diverted  the  capital  in  many  cases  into  unproductive  State  enter- 
prises, and  while  enabling  the  States  to  reduce  their  debts  etc.,  it  frequently 
tempted  them  to  contract  more  debts  and  to  begin  more  reckless  improvements. 


26  SURPLUS  REVENUE. 

because  the  organism  was  so  deeply  affected  that  an  attempt  to 
heal  was  only  less  dangerous  than  neglect.  Our  criticism  and  our 
condemnation  must  be  visited  not  upon  the  act  so  much  as  upon 
the  courses  which  made  the  act  necessary. 


CHAPTER  IV. 

THE     SPECIE    CIRCULAR — THE      GROWING      SURPLUS — SUCCEEDING 
SURPLUSES,  AND    THE  ACTION  TAKEN  BY  THE  STATES  UPON 

THE    DEPOSITS. 

The  deposit  bill  had  passed,  but  though  it  was  directed  against 
the  mischievous  effects  of  the  surplus  it  was  not  all  that  was 
needed  ;  it  would  not  begin  to  act  for  six  months,  and  then  it  only 
turned  the  current  of  the  flood  instead  of  drying  up  its  source. 
To  do  this  the  Secretary  of  the  Treasury,  by  order  of  the  Presi- 
dent, after  Congress  broke  up,  issued  the  "  specie  circular,"  ' 
ordering  that  after  the  15th  of  August  nothing  but  gold  and  silver 
and  in  special  cases  Virginia  land  scrip  should  be  received  in  pay- 
ment for  public  lands,  "  provided  that  till  Dec.  15,  1836,  the  same 
indulgences  heretofore  extended  as  to  the  kind  of  money  received, 
may  be  continued  for  any  quantity  of  land  not  exceeding  320 
acres  to  each  purchaser,  who  is  an  actual  settler  or  bona  fide  resi- 
dent in  the  State  where  the  sales  are  made."  This  measure  was 
only  a  return  to  a  strict  enforcement  of  existing  laws  ;  but  at  a  time 
when  credit  was  very  general,  so  general  as  to  be  greatly  abused, 
to  have  the  credit  cease  in  just  those  transactions  where  it  had 
perhaps  been  most  abused  caused  great  annoyance  and  friction. 
The  opposition  asserted  that  the  measure  failed  to  accomplish  its 

'  It  was  dated  July  nth,  and  addressed  "To  receivers  of  public  money  and 
to  the  deposit  banks."  It  began:  "  In  consequence  of  complaints  which  have 
been  made  of  frauds,  speculations  and  monopolies  in  the  purchase  of  the  public 
lands,  and  the  aid  which  is  said  to  be  given  to  effect  these  objects  by  excessive 
bank  credits,  and  dangerous,  if  not  partial,  facilities  through  bank  drafts  and 
bank  deposits,  and  the  general  evil  influence  likely  to  result  to  the  public  inter- 
ests, and  especially  to  the  great  amount  of  money  in  the  Treasury,  and  the 
sound  condition  of  the  currency  of  the  country,  from  the  further  exchange  of 
the  national  domain  in  this  manner,  and  chiefly  for  bank  credits  and  paper 
money,  the  president,"  etc. — 50  Niles,  337. 

27 


28  SURPLUS  REVENUE. 

end,  and  that  its  effects  were  wholly  evil ;  Clay  '  and  Ewing 
declared  that  it  helped  the  speculators,  for  they  could  obtain 
specie,  and  Ewing '  further  objected  that  it  would  limit  the  sale 
of  land  and  raise  the  prices,  an  operation  highly  favorable  to 
speculators  who  had  bought.  But  this  could  not  be  helped,  and 
it  was  absolutely  necessary  to  diminish  the  land  sales  in  some  way. 
The  action  of  such  measures  is  never  pleasant,  and  the  "  specie 
circular  "  was  no  exception.  So  great  was  the  popular  feeling, 
however,  that  the  Senate  voted  to  annul  the  circular  41  to  5,  and 
the  House  143  to  59,  but  the  President  did  not  sign  the  bill' 

At  the  present  time  we  must  conclude  that  this  popular  objec- 
tion was  much  of  it  unreasoning.  The  criticisms  which  economic 
writers  of  to-day  make  are  rather  favorable  than  otherwise.* 

During  the  latter  part  of  the  summer  the  people  began  to  gird 
up  their  loins  for  the  Presidential  campaign,  and  little  interest  was 
shown  about  the  surplus. 

September  ist,  the  money  in  the  treasury  amounted  to  $37,817,- 
996.39  ;  this  added  to  the  amount  credited  to  public  officers — 
$4,847,926.55— made  a  total  of  $42,665,922.94  surplus  revenue.' 
Oct.  ist  this  total  was  $46,610,131.77.'  At  this  rate  the  sum  to  be 
divided  promised  to  be  about  $50,000,000,  or  about  $3.75  for  each 
free  inhabitant.  This  would  be  equivalent  to-day  to  a  distribu- 
tion of  $200,000,000.  But  these  high  expectations  were  not  to 
be  realized.  Nov.  ist  the  two  accounts  stood  at  $42,600,000  and 
$4,800,000,  a  gain  in  the  total  of  only  $700,000.     By  Dec,   ist 

'  51  Niles,  15. 

''si  Niles,  260. 

^  52  Niles,  26.     The  bill  was  sent  to  the  President  March  2d. 

*Wirth,  in  his  histoiy  of  the  crisis,  says  :  "  This  measure  [i.  e.,  the  circular] 
for  a  time  had  salutary  effects.  It  restrained  the  action  of  the  Western  banks, 
and  at  the  same  time  increased  in  advance  their  resources  against  the  pressure 
which  soon  appeared  in  the  money  market  of  the  commercial  cities  of  the  East 
and  of  Europe.  By  lessening  the  extent  of  the  credit  system,  it  did  away  with 
the  means  of  excessive  speculation,  and  worked  to  prevent  the  tendency  to  mo- 
nopolize the  best  public  lands."  Wirth,  147.  Prof.  Sumner  :  Jackson,  335-7. 
gives  a  concise  but  thorough  criticism  of  the  measure. 

*  51  Niles,  2. 

"51  Niles,  180. 


SURPLUS  REVENUE.  29 

there  had  been  a  falling  off  of  ^500,000,  and  by  Jan.  ist  the 
amount  was  still  less,  so  that  after  deducting  the  $5, 000, 000  of 
reserve  there  remained  only  $37,468,859  97  to  be  deposited  with 
the  States. 

Before  considering  the  preliminary  steps  to  the  execution  of  the 
deposit  act  which  were  taken  by  the  treasury,  it  will  be  best  to  gather 
up  some  threads  of  the  narrative  here,  and  so  render  our  course 
freer  from  digression  hereafter. 

Some  Whig  papers  feared  that  the  election  of  Van  Buren  would 
put  a  stop  to  distribution,  and  they  used  his  well-known  opposition 
to  the  scheme  as  a  campaign  argument.  A  specimen  may  be 
quoted  which  will  illustrate  this  feeling.  In  Connecticut  Van 
Buren  had  a  majority  of  620.  The  Connecticut  Courant,  in  com- 
menting upon  this  result  foreboded  that  the  longed-for  distribution 
would  be  prevented.  "When  that  takes  place,"  said  the  editor, 
"  it  will  be  found  that  the  people  of  the  State  have  purchased  the 
privilege  of  being  cheated  and  duped  by  selfish  demagogues  and 
hungry  horse-leeches  dearly,  by  paying  o?ie  fnillion  tivo  hundred 
t/wusajid  dollars  for  being  iniposed  upon  and  degraded."  ' 

The  act  of  June  23d  provided  only  for  the  surplus  in  the 
treasury  Jan.  i,  1837.  What  was  to  be  done  with  later  surpluses  ? 
This  question  arose  before  the  one  on  hand  was  fairly  disposed 
of,  and  long  before  it  was  known  whether  there  would  be  another 
surplus. 

A  well-known  writer  for  the  press — "  Pro  Bono  Publico," — 
hailing  from  Pennsylvania,  suggested  that  the  surplus  be  used  to 
redeem  the  Continental  money,  and  thus  to  wipe  away  the  stain 
still  hanging  over  it.^  This  proposition  aroused  no  marked  dis- 
cussion, but  the  general  question  received  attention  on  the 
opening  of  Congress.  On  Dec.  12th,  Mr.  Mercer,  of  Virginia, 
moved  a  resolution  to  instruct  the  Committee  of  Ways  and  Means 
to  report  a  bill  releasing  the  States  from  any  obligation  to  return 
any  part  of  the  surplus  that  they  might  receive.  This  bold  step 
toward  pure   distribution   found  many   supporters,   but  was  laid 

'  Conn.  Cotirant,  Nov.  12,  1836. 

*  National  Intelligencer,  Dec.  I2,  1836. 


30  SURPLUS  REVENUE. 

upon  the  table,  123  to  73/  A  few  days  later  Calhoun  introduced 
a  deposit  bill  providing  for  the  surplus  on  hand  Jan.  i,  1838, 
which  would  amount,  he  thought,  to  eight  million  dollars.  If  such 
a  revision  of  the  tariff  as  would  prevent  a  surplus  were  feasible, 
it  would  be  best  by  all  means  to  get  it ;  but  in  case  this  should  not 
be  possible,  it  was  far  preferable  to  deposit  the  money  with  the 
States  than  with  the  banks.^  Clay,  too,  had  introduced  by  this 
time  his  favorite  land  bill,^  but  neither  of  these  bills  passel.  Cal- 
houn's was  finally  tacked  on  to  a  bill  appropriating  money  for 
fortifications  ;  in  this  shape  it  passed  the  House,  but  the  Senate 
refused  the  amendment,  26  to  19.'  The  House  disagreed, 
and  the  Senate  insisted  on  striking  out  the  deposit  clause,  28 
to  22.'  Friday,  March  3d,  the  Senate  voted,  27  to  23,  to 
adhere  to  its  objections  to  the  deposit  clause,  and  the  bill  was 
lost  by  the  House  voting  to  adhere  to  the  disagreement,  106  to 
87." 

During  the  late  fall  and  winter  the  State  Legislatures  were  busy 
in  disposing  of  the  prospective  funds.  Their  measures  will  be  de- 
tailed later,  but  this  is  the  best  place  to  show  how  perplexing  the 
work  was,  and  how  carefully  the  law-makers  were  watched  by 
those  whose  hands  itched  for  the  Government  money.  In  many 
cases  special  sessions  were  summoned  at  considerable  expense,  as 
there  was  no  little  controversy  as  to  the  use  to  be  made  of  the 

^  51  Niles,  255,  and  i  Benton,  707. 

"51  Niles,  309. 

'  I  Benton,  707. 

*  52  Niles,  6. 

"  JbicL,  8. 

^  Ibid.,  24.  On  this  result  the  Washington  correspondent  of  the  Ne^o  Haven 
Palladium  commented  as  follows  :  "  The  Senate  has  denied  the  request  o£  the 
Representatives  that  their  own  money  be  deposited  with  them,  and  has  decreed 
that  it  be  left  in  the  vaults  of  the  deposit  banks  at  two  per  cent,  per  annum 
[the  eleventh  section  of  the  act  of  June  23,  1836,  provided  that  a  deposit 
bank  should  pay  two  per  cent,  interest  a  year  on  all  the  excess  of  its  govern- 
ment deposits  over  one-fourth  its  capital]  when  to  the  people  it  is  worth  two  per 
cent,  a  month." 

It  would  be  interesting  to  know  how  the  correspondent,  March  11,  1837, 
knew  that  money  would  be  worth  two  per  cent,  per  month  nearly  a  year  later. 


SURPLUS  REVENUE.  3 1 

money.     In  New  Hampshire  the  discussion  took  up  far  more  time 
than  the  whole  session  usually  occupied.' 

In  Massachusetts  the  question  was  discussed  two  or  three  months 
off  and  on,  and  when  the  lower  house  of  the  Legislature  voted  421 
to  I  to  distribute  the  surplus  among  the  cities  and  towns,  high 
hopes  were  awakened  in  all  children  who  were  out  of  pocket- 
money.^  The  country  towns  especially  were  in  favor  of  this  pro- 
ceeding,' and  we  read  in  the  Boston  Courier  that  most  newspapers 
also  "  seemed  to  be  in  favor  of  distributing  this  God-send  to  the 
towns  in  proportion  to  the  number  of  inhabitants."     The  Courier 

'  Gov.  Hill,  in  approving  the  bill  accepting  and  disposing  of  the  deposit, 
said  :  "  With  a  Legislature  composed  of  gentlemen  scarcely  less  intelligent  and 
patriotic  than  any  other  public  body  that  ever  convened  in  the  State,  the  people 
will  be  surprised  to  learn  that  so  great  has  been  the  agitation  produced  in  antici- 
pation of  the  surplus  revenue  for  this  State,  that  the  important  measures  of  the 
session  had  not  even  been  reported  in  that  branch  in  which  they  are  expected  to 
originate  until  long  after  the  period  when  ordinary  sessions  have  terminated." — 
The  Globe,  Jan.  30,  1837. 

In  New  Hampshire,  a  minority  report  was  made  against  accepting  the  deposit. 
See  below  "  New  Hampshire." 

Mr  Knox  notes  (p.  181)  that  the  Legislature  of  N.  H.  by  resolution  declared 
any  distribution  of  surplus  unconstitutional,  and  instructed  their  delegates  to 
vote  against  a  relinquishment  by  the  U.  S.  of  the  sums  deposited,  while  the 
legislators  of  Indiana  pursued  just  the  opposite  course. 

"^  This  extract  from  the  Boston  Courier  is  interesting  as  showing  the  way  in 
which  the  topic  was  looked  at  by  many.  "  The  Western  mail  has  just  brought 
us  the  following  :  '  To  the  Editor  of  the  Courier :  I  have  a  little  son,  eight 
years  old,  whom  parental  partiality  might  regard  as  a  bright  boy.  He  fre- 
quently reads  the  newspapers,  and  is  much  interested  in  the  disposition  of  the 
surplus  revenue  in  Massachusetts.  He  is  decidedly  in  favor  of  its  distribution 
among  the  towns  in  proportion  to  their  population,  and  is  particularly  anxious 
about  it  now,  as  he  is  nearly  out  of  pocket-money.  Three  dollars  in  his  eyes  are 
a  large  sum  for  sugar  plums,  and  he  is  sure  if  the  towns  get  the  money,  he  shall 
have  so  much,  whether  father  and  mother  are  willing  or  not.  Is  he  not  a  promis- 
ing candidate  for  public  favor  ?     Yours  respectfully,  WORCESTER.'  " 

Boston  Courier,  Jan.  19,  1837. 

An  acquaintance  of  the  writer's  was  more  fortunate  in  his  childhood  than  this 
little  boy,  for  he  lived  in  Maine,  and  still  remembers  getting  between  two  and 
three  dollars  from  the  town  officers. 

*  2  New  Haven  Register,  Jan.  21,  1837. 


32 


SURPLUS  REVENUE. 


had  first  favored  an  investment  in  internal  improvements,  but  some 
of  its  contemporaries  had  replied  that  this  would  aid  corporations 
and  individuals,  and  that  not  a  farthing  of  the  money  would  then 
benefit  the  great  mass  of  the  people.  If  lent  to  the  towns,  the 
benefit  would  be  unequal  ;  why  not,  then,  said  the  Courier,  dis- 
tribute it  among  the  people  ?  It  was  true  democratic  doctrine,  and 
would  bring  each  individual  about  $2/  At  another  time,  when  the 
division  among  the  towns  seemed  likely  to  be  carried  through,  the 
Courier  very  much  regretted  that  Congress  had  not  provided  for 
the  distribution  of  the  money.  "  The  popular  doctrine  of  distribu- 
tion to  the  various  counties  in  some  States  and  to  towns  in  some 
others,  is  a  very  excellent  one  to  give  opportunities  to  political 
demagogues  to  show  their  love  to  the  people  and  help  themselves 
to  a  little  popularity  ;  but  such  a  disposition  can  be  of  no  possible 
benefit  to  the  towns."  In  five  years,  not  an  individual  in  New 
England  would  be  able  to  tell  whether  it  had  been  of  the  slightest 
benefit.  As  for  itself  it  preferred  a  ''per  capita  distribution  of  the 
money  ;  then,  at  least,  every  body  would  get  something." '  The 
matter  was  not  settled  till  the  21st  of  March. 

In  Connecticut  a  special  session  was  called  which  met  at  New 
Haven,  Dec.  21st.  The  day  before  the  session  opened  the  ISleiv 
Haven  Herald,  a  lively  little  Whig  daily,  to  give  the  law-makers 
something  to  think  about,  pronounced  dividing  the  surplus  up 
among  the  towns,  which  might  use  the  interest  but  must  keep  the 
principal  inviolate,  "about  equal  to  throwing  it  into  the  flames." 
It  would  be  divided  into  two  hundred  and  thirty-four  parts,  there 
would  be  the  same  number  of  responsibilities,  ten  times  as  many 
subordinate  responsibilities  when  it  was  loaned,  and  who  could 
expect  ever  to  scrape  it  together  again  ?  It  did  not  approve  of 
applying  the  funds  to  schools  or  to  improvements,  as  all  would 

^  It  continued  :  "  If  any  one  (like  ourself,  for  instance)  should  have  a  number 
of  children— say  a  dozen,  more  or  less— his  share  of  the  surplus  would  replenish 
his  pocket  very  comfortably — a  consideration  of  no  small  weight  in  these  days, 
when  breeches  pockets  are  so  degenerately  empty.  This  case  addresses  itself  so 
vitally  to  every  man's  sensibilities  that  we  look  for  a  large  majority  on  our 
side." — Boston  Courier  ]a.n.  9,  1837. 

*  Boston  Courier,  Feb.  2,  1837. 


SURPLUS  REVENUE.  33 

not  then  enjoy  the  advantages  of  it  ;  it  would  be  best  to  use  it 
to  pay  the  State  tax.  It  should  be  accounted  as  a  liability  of  the 
State,  though  every  man  of  common-sense  could  see  that  it  would 
never  be  called  for/ 

After  three  days  of  discussion,  the  Herald  declared  it  did  not 
know  how  the  surplus  business  was  coming  out  :  "  Both  houses 
seem  to  be  acting  'upon  their  own  hook,'  It  will  probably  result 
something  like  the  Seminole  war,  in  which  every  general  has 
achieved  a  victory  and  retired,  leaving  his  successors  to  fight  the 
battle  over  again,  while  each  '  reposes  on  his  laurels  '  till  a  new 
participant  comes  to  share  the  glory  and  divide  the  spoils. 
Uncle  Sam  pays."  ^  The  noise  of  the  fray  was  not  confined 
to  Connecticut,  but  on  the  28th  of  Dec,  Mr.  Niles,  from  Con- 
necticut, rose  in  the  Senate  in  Washington  and  quoted  from 
a  letter  he  had  received  from  a  friend  on  the  spot  :  "  For 
God's  sake  send  no  more  money  among  us."  Mr.  Niles 
hoped  the  fund  would  prove  beneficent  to  the  State,  al- 
though for  a  time  it  might  distract  its  councils.  There  were 
those  however  who  regarded  the  evil  as  greater  than  the 
benefit.' 

The  bill  proposed  by  the  State  Senate  contained  a  provision 
that  the  interest  on  this  fund  be  applied  to  support  the  town 
paupers  or  for  education.  Of  this  scheme  the  Herald  sdJxd  :  "  To 
give  the  money  to  paupers  would  no  doubt  be  a  great  relief  to  the 
the  New  York  almshouses,  and  set  upon  our  State  such  a  flood  of 
pauperism  as  would  keep  our  inhabitant  manufactories  in  con- 
stant exercise  of  their  benevolent  designs."  *  Dec.  27th,  in  refer- 
ence to  the  progress  of  the  debate,  it  said  :  '*  It  will  be  seen  by 
the  proceedings  of  the  Legislature  that  the  house,  after  being 
in  a  state  of  betweenity — in  which  they  have  had  to  stop  and 
take  an  observation  to  determine  their  whereabouts, — have  at  last 
got  into  a  '  committee  of  the  whole  upon  the  state  of  the  common- 

'  N.  H.  Herald,  Dec.  20,  1836. 
*  N.  H.  Herald,  Dec.  24,  1836. 
'  The  Globe,  Jan.  3,  1837. 
^N.  H.  Herald,  Dec.  27,  1836. 


34  SURPLUS  REVENUE. 

wealth.' "  '  The  bill  passed  on  the  29th  with  two  dissenting 
voices  in  the  House  and  one  in  the  Senate." 

The  Register,  the  administration  paper,  did  not  get  so  excited 
about  the  surplus,  and  laughed  at  ihQ  Herald  ior  its  fretting.  The 
Herald,  however,  lost  none  of  its  interest  in  the  matter,  but  still 
had  something  to  say  from  time  to  time.  On  Jan.  17th  it 
jubilantly  exclaimed  :  "  We  presume  the  money  will  be  in  the 
treasurer's  hands  in  a  few  days,  and  those  that  want  loans  should 
be  on  the  qui  vive  with  their  securities  when  the  managers  will 
'  down  with  the  dust.'  "  ' 

This  account  has  been  given  at  length  to  present  an  outline 
picture  of  the  discussions  and  feelings  that  prevailed  in  every 
State.  From  what  has  been  quoted  it  appears  that  some  looked 
upon  the  distribution  as  a  kind  of  joke,  while  others  considered  it 
as  earnest  a  matter  as  the  acquisition  of  two  dollars  is  ordinarily 
regarded.  In  general  the  tone  of  the  discussion  is  undignified, 
and  the  demoralizing  effects  of  a  distribution  policy  of  this  kind 
are  easily  seen. 

'  N.  H.  Herald,  Dec.  29th. 

"^  During  the  discussion  Wesley  [Wesleyan]  University  and  Washington 
[Trinity]  College  petitioned  for  an  annual  allowance  from  the  fund.  N.  H. 
Herald,  Dec.  26th.  At  the  same  time  the  president  and  fellows  of  Yale  sent  in 
a  petition  asking  aid  in  assisting  indigent  students.  This  immediately  follows 
the  notices  of  the  other  two  petitions  in  the  report,  and  one  is  led  to  suppose 
that  the  surplus  may  have  been  the  prospective  source  of  this  aid.  The  college 
books,  however,  contain  no  reference  to  that  petition,  and  the  Secretary  of  the 
corporation  thinks  the  surplus  was  not  the  source  from  which  the  college  hoped 
to  draw. 

^  A  little  later  (Feb.  4th)  the  Register  thought  the  distribution  was  working 
favorably,  and  continued:  "Now  the  people  begin  to  see  and  own  that  our 
national  affairs  must  have  been  well  managed,  or  such  large  sums  of  money 
could  not  well  have  been  saved  for  distribution."  This  comforting  conclusion 
was  only  partly  true.  Under  good  management  the  surplus  would  have  been 
far  smaller,  and  under  the  best  there  would  have  been  none. 


CHAPTER  V. 

THE  STEPS  TAKEN  TO  CARRY  OUT  THE  ACT — THE  PANIC  AND 
THE  FOURTH  INSTALMENT. 

We  have  now  to  consider  the  steps  taken  to  carry  out  the  de- 
posit act.  The  amount  on  deposit  in  the  different  States  varied 
widely  from  the  shares  that  would  fall  to  those  States,  for  the 
largest  deposits  were  in  commercial  centres,  or  in  the  neighbor- 
hood of  the  land  speculations.  Furthermore,  very  many  deposit 
banks  had  deposits  far  exceeding  their  capital.  This  was  true  of 
fifteen  of  the  nineteen  banks  which  employed  R.  M.  Whitney  as 
an  agent  between  them  and  the  treasury  ;  and  these  nineteen 
deposit  banks  contained  $24,200,000,  while  the  sixty-six  other 
banks,  which  did  not  employ  Whitney,  contained  only  $16,- 
900,000.'  Michigan,  which  was  increasing  in  population  with  great 
rapidity,  is  the  strongest  case  in  point.  During  1836  $5,053,  611.52 
were  received  for  lands  sold  there. ^  In  October,  1836,  the 
Farmers'  and  Mechanics'  Bank  of  Michigan,  with  a  capital  of 
$150,000,  had  $1,029,200  on  deposit,  and  the  State  Bank,  with  a 
capital  of  $444,779,  had  $1,259,974  on  deposit.' 

Thus  Michigan  had  $2,267,174  on  deposit  within  her  borders, 
while  her  share  from  the  instalment  to  be  received  in  1837 
amounted  to  only  $382,335.31. 

This  was  one  inequality  to  be  adjusted.  But  besides  this  there 
was  another  of  no  less  difficulty,  for  the  first  section  of  the  act  of 
June  23d  ^  had  ordained  that  no  bank  should  have  Government 
deposits  exceeding  three  quarters  of  its  capital  stock  actually  paid 
in  any  longer  time  than  was  needed  for  the  Secretary  to  remove  the 

'  52  Niles,  91.     For]the  case  of  the  Commercial  Bank  of  Cincinnati  see  p.  13. 

*  51  Niles,  353. 

'  50  Niles,  290,  and  51  Niles,  249. 

35 


36  SURPLUS  REVENUE. 

excess  according  to  the  provisions  of  section  twelve.  Conse- 
quently the  most  arbitrary  transfers  of  money  had  to  be  made 
from  place  to  place,  and  the  money  markets  of  business  centres 
were  exposed  alternately  to  hot  and  cold  blasts,  while  constant 
transportation  of  money  hither  and  thither  withdrew  it  from  the 
market  to  the  great  embarrassment  of  business  men. 

The  Secretary  of  the  Treasury  had  to  keep  these  removals  in 
mind  as  well  as  the  distribution  to  come  in  January.  Further- 
more, it  was  necessary  to  equalize  as  far  as  was  feasible  the 
amounts  on  deposit  in  a  given  State  with  the  amounts  to  be  dis- 
tributed to  that  State,  so  that  when  the  act  was  carried  out  there 
might  be  as  little  disturbance  as  possible.  In  accordance  with 
this  intention,  he  notified  each  deposit  bank  on  November  i,  1836, 
that  a  few  days  after  January  ist,  or,  if  the  deposit  should  not  have 

been  accepted  by  the  State  of at  that  date,  so  soon  as  it  should 

be  accepted,  a  transfer  draft  would  be  drawn  upon  it  in  favor  of 

said   State  for  about   the  sum  of  % .     Similar  drafts  would 

come  April,  July,  and  October  ist.'  The  money  was  to  be  paid 
to  the  State  in  which  the  bank  was  situated  or  to  some  neighbor- 
ing State.  Now  it  is  very  clear  that  here  were  several  delicate 
and  perplexing  operations  to  be  performed.  The  action,  as  has 
been  said,  was  wholly  arbitrary  ;  no  matter  how  the  money  market 
stood,  no  matter  how  sharp  the  demand  might  be  in  one  place, 
the  law  said  that  the  blind  transfers  of  money  must  be  made. 
Consequently  there  was  first  a  pressure  and  then  a  glut.  But  the 
whole  affair  was  vastly  complicated  by  the  fact  that  the  deposits, 
instead  of  being  in  the  bank  vaults,  were  loaned  out  in  every  direc- 
tion, for  the  banks  had  expected  to  have  the  money  until  it  was 
needed  for  expenditures.  These  loans  all  had  to  be  suddenly 
called  in,*  an  extremely  embarrassing  task.  . 

A  writer  of  the  time  vividly  described  the  period  immediately 
preceding  the  distribution  :  "  The  monetary  affairs  of  the  whole 
country  were  convulsed — millions  upon  millions  of  coin  were  in 
transitu  in    every   direction,  and    consequently  withdrawn    from 

'  51  Niles,  167. 

"  See  Van  Buren's  Message  to  Congress  in  September,  1837. 


SURPLUS  REVENUE.  37 

useful  employment.  Specie  was  going  up  and  down  the  same 
river,  to  and  from  the  South  and  North  and  the  East  and  West  at 
the  same  time  ;  millions  were  withdrawn  from  their  usual  and 
natural  channels  and  forced  against  the  current  of  trade  in  literal 
fulfilment  of  the  distribution  law,  to  points  where  public  money 
had  previously  never  been  either  collected  or  expended  except  to 
a  very  limited  extent."  ' 

Another  writer  said  :  "  The  passage  of  the  distribution  law  was 
the  signal  for  a  general  contraction  of  the  loans  of  the  deposit 
banks,  and  everybody  knows  that  no  contraction  of  bank  loans  to 
the  extent  of  thirty-six  viillions  of  dollars  can  take  place  in  the 
United  States  within  fifteen  months  without  creating  a  great  and 
general  pressure  for  money."  " 

In  fact,  the  newspapers  of  the  time,  both  Whig  and  Democratic, 
referred  the  pressure  of  the  spring  of  1837  to  the  influence  of  the 
surplus  and  its  management.  There  is  no  doubt  that  it  was  an 
effective  cause,  a  cause  sufficient  in  itself  to  produce  a  severe 
strain,  but  not  adequate  to  produce  the  crash  that  finally  came. 
The  measures  taken  to  prepare  for  distribution  intensified  all  the 
difficulties  of  the  time.  So  much  is  sure.  But  it  might  be  a  fair 
question  whether  the  reckless  financiering  would  have  gone  to  such 
disastrous  lengths  without  the  constant  and  violent  stimulus  in  the 
West  and  South  which  came  from  the  deposits. 

The  cotton  failures  in  the  South  were  the  beginning  of  the  storm, 
but  cotton  speculation  was  a  natural  result  and  accompaniment  of 
the  speculative  spirit  which  derived  its  life  from  the  easy  loans  of 
Government  money. 

March  30th,  the  Neiv  York  American  (Whig)  attributed  a  por- 
tion of  the  embarrassment  to  the  curtailment  which  the  deposit 
banks  were  making  to  be  prepared  to  pay  over  the  second  instal- 
ment April  I  St.  ^ 

The  Globe,  a  little  later,  said:  "The  proximate  cause  of  the 

'  I  Hazard,  328,  from  an  article  by  "  A  gentleman  fully  versed  in  the  past 
and  present  conditions  of  our  monetary  affairs." 

"^  "  Examiner,"  in  Nat.  Gazette,  Mar.  22,  1S37,  from  i  Financial  Register,  67. 
'  Quoted  in  the  Globe,  April  20,  1837. 


■386399 


38  SURPLUS  REVENUE. 

present  disorders  in  the  exchanges,  and  in  some  degree  in  the 
money  market  is,  as  is  known  to  every  man  of  sense,  the  distribu- 
tion act.  This  distribution  act  has  rendered  it  necessary  to  transfer, 
from  point  to  point,  an  immense  amount  of  funds,  not  according 
to  the  wants  of  the  Government,  nor  according  to  the  demands  of 
commerce,  but  according  to  the  provisions  of  an  act  of  Congress 
which  completely  binds  the  hands  of  the  executive  authorities.^ 

On  May  6th,  four  days  before  the  general  suspension  in  New 
York,  Horace  Greeley  enumerated  twenty-one  "  causes  of  our 
calamities."  Among  them  were  :  8th,  "  The  removal  of  the  deposits. 
Sudden  contraction  of  United  States  and  other  bank  issues 
followed  by  a  corresponding  expansion.  9th,  The  accumulation 
of  public  money  in  the  Western  banks,  whence  it  was  loaned  and 
reloaned  for  speculations  in  public  lands.  13th,  The  act  of 
Congress  authorizing  a  distribution  of  the  public  money.  15th, 
Injudicious  steps  taken  by  the  Secretary  of  the  Treasury  to  pre- 
pare for  an  obedience  to  the  Distribution  Law  (some  say  rather 
with  a  view  to  render  it  odious')  by  a  premature  transfer  to  the 
several  States."  ^ 

Late  in  June  the  Charleston  Courier  in  discussing  the  causes  of 
the  crisis  called  attention  to  the  great  change  in  the  distribution 
of  the  national  capital ;  it  declared  that  the  clause  removing  the 
deposits  from  banks  when  the  deposits  exceeded  three  fourths  of 
their  capital,  was  worse  in  its  effects  than  the  first  removal  in 
'ZZ-^  $6,168,854.66  had  been  withdrawn  from  the  New  York  City 
banks  between  Jan.  ist  and  April  ist,'  $1,500,000  being  in  specie. 
Much  of  this  had  been  carried  West  and  sunk  in  land  speculations, 
thus  being  taken  out  of  the  seats  of  commerce.  "That  the 
deposit  and  distribution  act  has  infinitely  aggravated  the  evils  of 

'  The  Globe,  May  10,  1837. 

^  There  appear  to  be  no  grounds  whatever  for  this  fling. 

'  Neiv    Yorker,  May  6th. 

*  However  this  may  have  seemed  at  the  time,  it  must  be  remembered  that  it 
was  the  first  removal  that  made  this  one  possible  and  necessary.  It  certainly 
was  not  expedient  to  allow  a  bank  with  a  $150,000  capital  to  get  gain  on 
$1,000,000  public  money.     See  p.  35. 

^  See  Appendix  II.,  Table  I. 


SURPLUS  REVENUE.  39 

speculation,  and  has  almost  indefinitely  postponed  the  period  of 
return  to  a  wholesome  condition  of  things,  is  demonstrated.  That 
a  vast  amount  of  public  funds  has  been  lost  to  the  country,  we  feel 
convinced  ;  that  it  never  will  be  recovered  from  the  States,  or 
what  remained  in  deposit,  from  that  brood  of  deposit  banks 
which  that  act  brought  into  existence  we  feel  equally  convinced."  ' 

The  deposit  banks  had  suspended  with  the  rest,  and,  in  fact, 
the  Dry  Dock  Bank,  which  yielded  first  in  New  York,  was  a  "  pet." 
This  was  a  source  of  keen  chagrin  to  the  administration.  May 
17th  Secretary  Woodbury  sent  a  circular  to  the  banks  that  had  sus- 
pended, beginning  :  "As  the  painful  information  has  reached  this 
department  through  the  public  press,^  that  your  bank  has  sus- 
pended specie  payments,  the  object  of  this  letter  is  to  learn, 
officially,  if  that  fact  has  happened."  The  banks  were  therein 
notified  that  no  further  deposits  could  be  made  with  them,  and 
that  what  they  had  would  be  removed  by  warrants  and  transfers, 
reasonable  in  amount  and  time  of  payment.  They  were  asked 
further  when  and  how  they  expected  to  resume,  and  what  meas- 
ures they  expected  to  take  to  secure  the  Government  money.^ 

On  the  26th  of  May  a  Treasury  order  was  issued  requiring  that 
the  public  money  should  be  deposited  only  in  banks  paying  specie  ; 
if  there  were  no  such  banks,  the  money  was  to  be  deposited  in 
those  pledging  themselves  to  return  the  deposit  punctually  when 
wanted,  in  the  same  kind  of  money  that  was  placed  in  them.  The 
deposits  not  in  such  banks  were  to  be  drawn  and  placed  in  the 
same.'  As  the  banks  had  suspended,  paper  currency  more  or  less 
depreciated  was  afloat  everywhere.  In  view  of  this  the  Secretary, 
in  issuing  his  order  for  the  transfers  of  the  July  instalment,  dis- 
tinctly informed  the  authorities  who  were  to  receive  the  money, 
that  no  State  was  "desired  to  accept  from  any  deposit  bank  any 

*  In  the  Globe,  July  3,  1837. 

"^  It  is  a  sufficient  commentary  on  the  deposit  system  that  the  relationsbetween 
the  Treasury  Department  and  the  depositaries  was  so  loose  and  careless  that  the 
Secretary  first  learned  of  such  a  vital  fact  through  the  newspapers  ! 

^  52  Niles,  183  and  213, 

*  52  Niles,  258.  During  the  summer  legal  proceedings  were  commenced 
against  nine  deposit  banks,  and  additional  security  exacted  from  others. 


40  SURPLUS  REVENUE. 

currency  which  is  not  available,  and  at  par,  and  which  the  State 
would  not  hold  itself  in  readiness  to  account  for  in  the  same  man- 
ner, when  required  under  the  provisions  of  the  law.  Should  any 
banks  fail  to  deposit  such  currency,  he  requested  that  the  orders 
of  transfer  might  be  returned  in  order  that  the  subject  might  be 
submitted  to  Congress."  ' 

No  instance  has  been  found  where  a  State  did  this.  The  States 
preferred  to  take  a  depreciated  currency  rather  than  to  wait,  for 
they  wanted  the  money  as  soon  as  possible,  and  felt,  most  of  them, 
that  it  would  probably  never  be  recalled. 

Soon  after  the  outbreak  of  the  crisis,  May  15th,  the  President 
called  an  extra  session  of  Congress  to  consider  "  great  and  weighty 
matters,"  or  in  other  words,  what  was  to  be  done  about  the  de- 
posit system  and  about  the  probability  of  an  empty  treasury.  The 
resources  of  the  Treasury  had  been  wellnigh  exhausted  by  the 
first  three  instalments,  for  the  great  deposits  in  the  Southern  and 
Western  banks  that  had  failed  were  not  available.^  In  his  mes- 
sage Van  Buren  thoroughly  discussed  the  situation.  There  had 
been  a  prospect  of  a  deficiency  in  the  Treasury,  he  said,  which 
could  not  well  be  supplied  by  drawing  on  the  sums  already  de- 
posited with  States,  on  account  of  the  restricted  conditions  of 
such  a  call,  wherefore  he  had  felt  bound  to  summon  an  extra 
session,  that  the  problem  might  be  dealt  with  as  soon  as  possible. 
He  announced  a  probable  deficiency  of  $6,000,000  and  under  a  cer- 
tain contingency,  of  $10,000,000,°  ere  the  close  of  the  year, 
and  recommended  the  withholding  of  the  fourth  instalment  until 
the  money  could  be  collected  from  the  banks  ;  treasury  notes 
might  also  be  issued  for  speedy  redemption.  The  recommendation 
about  the  fourth  instalment  was  sound  and  commended  itself  to 
the  good  financiers  of  the  time.  The  Financial  Register  had 
pronounced  the  repeal  of  the  act,  directing  the  fourth  instalment 
to  be  paid,  indispensable.^ 

'  The  Globe,  in  52  Niles,  241. 

^  See  Appendix  II.,  Table  II.  The  first  three  instalments  for  the  States  came 
mainly  from  the  North  and  East.  In  the  fall  of  1837  there  was  still  $9,000,- 
000  on  deposit  in  the  West  and  Southwest. 

°  53  Niles,  15.  '^A^ew  Haven  Register,  Sept.  2,  1837. 


SURPLUS  REVENUE.  4 1 

Some  of  the  Whig  press,  however,  were  disgusted  and  enraged 
at  the  propositions.' 

The  whole  discussion  of  the  fourth  instahnent  is  instructive  and 
rather  amusing  withal.  Many  members  of  the  Senate  and  House 
declared  that  the  General  Government  had  contracted  to  deliver 
the  money,  and  as  the  representatives  of  the  States  they  claimed 
the  payment  of  the  debt.  True,  the  United  States  could  not  be 
forced  by  a  legal  process,  but  their  honor  should  be  kept  stainless. 
It  was  only  after  prolonged  and  hot  debating  that  on  the  2d  of 
Oct.  a  bill  was  passed  postponing  the  payment  of  the  instalment 
till  Jan.  I,  1839,  when  the  duty  of  the  Secretary  was  made  i)er- 
emptory  to  pay  it,  the  nominal  discretion  of  Congress  over  the 
matter  being  denied. °  At  the  same  time  the  power  to  recall  the 
amount  already  deposited  was  taken  from  the  Secretary  of  the 
Treasury  and  given  to  Congress,  in  other  words  to  the  States 
themselves,  an  action  equivalent  to  declaring  the  "deposit"  a  gift 
to  the  States,  for  it  was  morally  certain  that  the  States  would 
never  vote  to  give  it  back.  Jan.  i,  1839,  there  was  no  surplus  and 
the  fourth  instalment  was  not  paid.  To  this  day  the  three  instal- 
ments are  carried  on  the  treasurer's  books  as  unavailable  funds, 
and  are  included  in  "  the  balance  in  the  Treasury."  '  Twice,  at 
least,  since  1839  this  surplus  revenue  has  been  mentioned  as  an 
available  resource.  In  his  report  of  Dec.  9,  1S40,  Secretary 
Woodbury,  in  view  of  a  deficiency  of  revenue  in  1842  in  conse- 
quence of  tariff  reduction,  advised  that  so  much  of  the  surplus  as 
was  needful  be  recalled." 

The  second  time  was  in  1861,  when  it  was  proposed  to  borrow 
$25,000,000  to  meet  the  demands  upon  the  Treasury.  As  a 
security  for  such  a  loan  Secretary  Dix,  in  a  letter  to  the  Ways  and 
Means  Committee,  Jan.  28th,  recommended  that  "  the  several 
States  be  requested  to  pledge  the  U.  S.  deposit  funds  in   their 

1  "  Among  the  '  Grave  and  Weighty  Matters'  to  consider  which  Van  Buren 
summoned  the  extra  session,  is  placed  first  by  the  Ohio  Register :  '  To  rob  the 
people  of  more  than  nine  millions  of  dollars'  " — A^.  H.  Herald,  Oct.  6,  1837. 

'See  2  Benton,  38. 

^  Treas.  Report,  1883,  19.  '  3  Hazard,  404. 


42  SURPLUS  REVENUE. 

hands."  '  As  for  the  fourth  instalment,  again,  those  who  hungered 
for  public  money  did  not  fail  to  look  upon  it  with  longing  eyes. 
Gov.  Seward,  in  Jan.  1841,  said  :  "  It  has  been  recommended 
that  the  Legislature  should  insist  upon  the  payment  by  the  Federal 
Government  of  the  fourth  instalment  of  the  surplus  revenue,  and 
require  a  relinquishment  by  Congress  of  all  claims  for  a  reim- 
bursement of  moneys  constituting  the  United  States  Deposit 
Fund."" 

Though  applications  appear  to  have  been  made  for  the  pay- 
ment of  the  fourth  instalment,^  it  was  not  till  lately  that  a  State 

'  I  Blaine,  397,  more  fully  stated  in  Knox,  189. 

It  may  be  worth  remarking  that  Gen.  Dix  came  from  a  State  where  the  deposit 
fund  had  been  kept  inviolable.  It  is  not  likely  that  he  would  have  made  this 
proposition  if  he  had  come  from  a  State  where  the  fund  had  long  been  spent. 

^  4  Hazard,  36  ;  2  Seward's  works,  267.  The  writer  cannot  forbear  quoting 
the  following  curious  specimens.  Gov.  Seward  says  that  "  if  New  York  got  her 
share  yearly  of  the  public-land  revenues,  the  internal-improvement  enterprises 
would  no  longer  be  rivals,  for  all  would  have  all  the  money  they  wanted  ;  dif- 
ferent educational  institutions  would  no  longer  contend  for  shares,  as  there 
would  be  ample  for  all.  We  are  now  obliged  to  practise  a  cold,  calculating 
charity.  Our  almshouses  are  perhaps  sufiiciently  convenient  for  those  who  are 
brought  into  them  by  idleness  and  vice,  but  do  they  afford  all  the  enjoyments 
we  would  be  happy  to  yield  to  the  aged,  the  sick,  the  widow,  and  the  orphan, 
whose  afflictions  are  the  result  of  providential  visitation  unattended  by  vice  or 
error  of  their  own  ?  .  .  .  Let  us  bring  annually  into  the  treasury  of  the 
State  her  proportion  of  these  revenues  (i.  e.  from  land  sales),  and  our  fellow- 
citizens  can  be  relieved  of  the  burthen  of  repairing  common  roads,  and  of  pay- 
ing tolls  upon  canals,  railroads,  and  turnpikes,  and  from  the  heavy  expenses  of 
the  administration  of  justice,  and  the  support  of  schools  and  charities.  We  are 
sometimes  called  by  the  adversaries  of  internal  improvement  to  contemplate  a 
condition  of  exhausting  taxation.  Who  can  object  to  a  measure  which  would 
almost  secure  a  general  exemption  from  the  burthens  of  government."  4 
Hazard,  54-55  ;  2  Seward's  Works,  291.  It  would  be  hard  to  find  a  more 
seductive  picture  of  the  benefits  of  a  high  tariff  and  of  distribution  of  surpluses. 
No  taxes  and  every  man's  car  fare  paid  whither  he  would  go  ! 

'  This  is  stated  upon  the  authority  of  Senator  Garland,  of  Arkansas,  who 
asserted  (April  16,  1884)  that  the  Secretary  of  the  Treasury  had  brought  the 
matter  to  the  attention  of  Congress  at  nearly  every  session  on  account  of  the 
applications  made  by  the  different  States  from  time  to  time  for  the  advance  or 
deposit  of  this  fourth  instalment. — 15  Cong.  Record,  2996. 


SURPLUS  REVENUE.  43 

has  tried  to  force  the  contract  view  by  an  appeal  to  the  Supreme 
Court. 

In  1883  the  Legislature  of  Virginia  passed  an  act  authorizing  a 
claim  to  be  made  upon  the  Secretary  of  the  Treasury  for  the 
deposit  of  the  fourth  instalment.'  This  claim  was  made  through 
the  duly  authorized  agent,  but  the  Secretary  of  the  Treasury  re- 
fused to  grant  it.  The  State  then  applied  to  the  Supreme  Court 
of  the  United  States  for  a  mandamus  to  compel  the  Secretary  of 
the  Treasury  to  deposit  with  the  State  an  amount  equal  with  the 
fourth  instalment  ($732,809.33).  By  this  means  we  have  a  deci- 
sion of  the  Supreme  Court  on  the  point  whether  a  contract  ex- 
isted, as  was  so  loudly  and  solemnly  proclaimed  by  the  Whigs. 

The  Court  held  that  no  case  was  made  for  a  mandamus.  The 
"act  of  June  23,  1836,  created  no  debt  or  legal  obligation  upon 
the  part  of  the  Government,  but  only  made  the  States  the  deposi- 
taries, temporarily,  of  a  portion  of  the  public  revenue  not  needed, 
as  was  then  supposed,  for  the  purposes  of  the  United  States. 
.  .  .  We  are  of  the  opinion  that  the  Secretary  of  the  Treasury 
has  no  authority  under  existing  legislation,  and  without  further 
direction  from  Congress,  to  use  the  surplus  revenue  in  the  Treas- 
ury, from  whatever  source  derived,  or  whenever,  since  January  i, 
1839,  it  may  have  accrued,  for  the  purpose  of  making  the  fourth 
instalment  of  deposit  required  by  the  act  of  1836."  ^ 

*  Knox,  192.  Arkansas,  through  the  action  of  the  State  Treasurer  and 
Senator  Garland,  has  made  a  similar  claim.  The  Secretary  of  the  Treasury  re- 
plied that  the  tradition  of  the  department  for  over  a  dozen  years  had  considered 
the  act  of  June  23,  1836,  as  obsolete,  "  or  at  least  not  imperatively  effective 
during  a  season  of  large  public  federal  indebtedness,"  and  that  he  should  follow 
his  predecessors. — Knox,  ibid. 

"  III  U.  S.  Reports,  46-8.  The  decision  vv^as  rendered  March  17,  1884. 
April  i6th  Senator  Garland,  of  Arkansas,  remarked  that  this  decision  threw 
the  matter  back  upon  the  action  of  Congress,  and  he  offered  a  resolution  that 
the  Committee  of  Finance  should  investigate  the  matter  and  declare  whether,  in 
their  judgment,  the  Secretary  of  the  Treasury  should  be  authorized  and  directed 
to  make  this  payment  ;  and  if  not,  what  legislation,  if  any,  was  necessary  to 
adjust  the  matter. — 15  Cong.  Record,  2996. 


CHAPTER  VI. 
the  surplus  in  the  states. 

Alabama  Received  $669,088.95. 

The  surplus  was  accepted  December  16,  1836,  and  the  faith  of 
the  State  pledged  "  for  the  safe-keeping  and  repayment  thereof," 
according  to  the  requirements  of  the  national  act.' 

By  the  act  of  June  30,  1837,  the  money  was  to  be  deposited  in 
the  State  Bank  and  its  branches,  and  all  other  laws  were  repealed, 
provided  the  deposit  was  made  before  May  i,  1838.  The  State 
Bank  at  Tuscaloosa  and  the  four  branches,  situated  respectively 
in  Montgomery,  Mobile,  Decatur,  and  Huntsville,  were  each  to 
have  a  fifth. ^  The  conditions  were  complied  with,  for  we  soon 
find  in  the  report  of  a  commission  to  examine  the  State  Bank  that 
$133,817.79  was  credited  to  the  United  States  surplus  revenue.' 

In  February,  1840,  the  interest  on  the  surplus  was  devoted  to 
form  a  part  of  an  annual  payment  of  $200,000  required  of  the 
bank  and  its  branches  to  aid  in  establishing  a  school  system. 
This  law  was  repealed  January  21,  1843.'  The  bank  at  this  time 
was  greatly  embarrassed  by  heavy  fixed  charges,  and  the  repeal 
was  doubtless  a  measure  of  relief.  In  1841  these  fixed  charges 
exceeded  its  profits  about  $500,000  yearly,  and  were  paid  from 
the  capital."  In  fact,  for  a  few  years  previous  to  1843  all  the 
State  expenses  had  been  paid  by  the  banks.®  Among  the  items  of 
the  bank  capital  that  was  disappearing  we  find  "  university  and 

'  Acts  of  1836,  3  ;  Clay's  Digest,  552. 

"  Clay,  ibid. 

°  I  Financial  Reg.,  203. 

*  Eaton,  12. 

'  See  note  i  on  p.  45. 

"  63  Niles,  279. 

44 


SURPLUS  REVENUE.  45 

Other  funds  used  as  a  part  of  the  capital  of  the   State  Bank, 
$1,058,195."  '     The  surplus  is  probably  included  here. 

Besides  heavy  fixed  charges  constantly  diminishing  its  capital, 
bad  management  increased  the  difficulties  which  beset  the  bank. 
As  early  as  the  close  of  the  year  1839,  the  bank  commissioners  of 
the  State  announced  that  the  aggregate  loss  of  the  bank  and  its 
branches  reached  the  sum  of  $4,850,000,  "squandered,  according 
to  all  accounts,  in  every  direction,  and  never  more  to  be  returned 
to  the  public  coffers."  ^ 

Hardly  a  year  later,  early  in  1841,  the  bad  debts  due  the  bank 
of  the  State  and  its  branches  were  officially  announced  as  amount- 
ing to  $5,640,761.59,'  while  in  1844,  or  at  the  beginning  of  1845, 
a  legislative  committee  classified  the  debts  due  from  the  counties 
of  the  State  to  the  bank  and  its  branches  as  follows  : 

"Good" $6,755,103  27 

"Doubtful" 1,019,395   18 

"Bad" 6,179,680  27 

Unknown 632,792  48 

$14,586,781  20 

The  committee  thought  that  by  a  more  efficient  mode  of  collec- 
tion a  considerable  part  of  the  "  bad  "  and  "  doubtful  "  accounts 
might  be  recovered.^ 

We  have  assumed  that  the  surplus  was  included  in  the  capital 
of  the  bank  at  this  time  because  we  found  no  mention  of  its  pre- 
vious withdrawal,  but  in  1846  we  come  across  a  note  that  implies 
either  a  withdrawal  at  some  earlier  period,  or  that  the  State  au- 
thorities preferred  to  consider  that  the  surplus  had  not  suffered 
by  the  above-mentioned  losses,  but  was  still  available  for  any  pur- 
pose. In  this  meagre  note  the  surplus  revenue  is  mentioned 
among  the  items  of  the  State's  indebtedness  along  with  the  "  reve- 
nue fund  and  the  three-per-cent.  fund."  '     It  seems  more  prob- 

'  A  Petition  for  Reform,  5  Hazard,  294. 

*  57  Niles,  352. 
'  63  Niles,  71. 

*  67  Niles,  368. 

*  Am.  Aim.,  1847,  268. 


46  '  SURPLUS  REVENUE. 

able  that  this  means  that  the  State  had  borrowed  the  fund,  taking 
it  from  the  bank,  than  that  it  refers  to  the  obligation  of  the  State 
to  repay  it  to  the  General  Government.  A  year  later  we  read  :  "It 
is  considered  doubtful  whether  the  university  and  school  funds, 
and  the  surplus  revenue,  will  ever  be  repaid  from  the  treasury  of 
the  State."  ' 

The  fair  conclusion  seems  to  be,  then,  that  the  surplus  was  used 
for  State  purposes,  if  not  squandered  in  banking.'' 

The  authorities,  however,  still  kept  the  deposit  in  view  and,  in 
1854,  set  apart  and  appropriated,  among  the  sums  to  be  known  as 
the  educational  fund,  "  the  annual  interest  at  eight  per  cent,  on 
that  portion  of  the  surplus  revenue  of  the  United  States  deposited 
with  this  State  under  the  act  of  Congress  of  the  23d  of  June, 
1836."  The  fund  was  available  only  for  the  payment  of  teachers 
duly  qualified.' 

This  stipulation  was  repeated  in  1856,'  and  again  in  1860.^  The 
interest  fell  sadly  in  arrears  during  the  distresses  of  the  war  and 
of  the  reconstruction  period,  so  that  an  act  was  passed  October 
10,  1868,  appropriating  $245,411.46  for  the  year  beginning  Octo- 
ber I,  1868,  "  the  same  being  the  interest  now  due  from  the  State 
on  the  school  fund."  ° 

In  the  Revised  Code  of  1867  the  surplus  revenue  forms  the  first 
item  of  the  school  fund,  as  in  the  law  of  1854.' 

But  this  yearly  charge  of  $53,596.94  proved  too  heavy  a  burden 
upon  the  treasury  of  the  State,  which  was  heavily  in  debt,  and  had 
not  recovered  from  the  losses  of  the  war.  Consequently,  in  March, 
1875,  section  957  of  the  Code  was  repealed,  the  school  fund  re- 

1  Am.  Aim.,  1848,  286. 

'  Mr.  Eaton  says  the  surplus  was  used  up  in  the  war  by  the  State.  It  may 
be  so  accounted  on  the  State  books,  but  it  seems  very  doubtful  indeed  whether 
the  old  loan  was  ever  repaid  from  the  State  treasury.  It  would  be  almost  an 
unique  instance. 

'Acts,  1853-4,  8. 

"  Acts,   1856,  34. 

'  Eaton. 

*  Acts,   1868,  255. 

'  Walker,  R.  C,  262,  Sect.  957. 


SURPLUS  REVENUE.  47 

organized,  and  the  first  paragraph  about  the  surplus  stricken  out, 
no  mention  whatever  being  made  of  it.'  At  the  same  time,  how- 
ever, the  Constitution  of  1875  appropriated  for  education  "the 
income  arising  from  the  surpkis-revenue  fund  until  it  is  called  for 
by  the  United  States  Government."  ^  This  shows  that  the  intent 
of  the  repealing  act  was  not  to  abolish  the  fund,  but  to  lessen  the 
burden  which  an  interest  charge  of  eight  per  cent,  brought  upon 
the  treasury.  The  discrepancy  between  these  laws  was  removed 
by  the  educational  laws  of  February  18,  1876,  and  February  8, 
1 87 7,  which  re-enacted  the  surplus  revenue  clause  of  the  old  law, 
and  changed  the  rate  of  interest  from  eight  to  four  per  cent.^ 
Apparently  the  school  income  from  this  source  ceased  for  only 
one  year.  The  annual  appropriation  is  now  $26,763.47.  This 
money  is  all  raised  by  taxation,  and  is  in  no  way  the  incovie  of  the 
surplus  revenue.^  The  only  relation  which  can  fairly  be  said  to 
exist  between  this  appropriation  and  the  surplus  is  that  of  occasion 
to  event  ;  the  surplus  deposit  was  the  occasion  of  part  of  the  school 
appropriation  of  1854.  Or,  to  state  it  a  little  differently,  when 
they  made  an  annual  appropriation  for  education,  a  portion  thereof 
was  called  "  interest  on  the  deposit  fund." 

Arkansas  Received  $286,751.49. 
By  the  act  of  November  2,  1836,  the  surplus  was  deposited  in 
the  principal  bank,  and  was  to  be  "  considered  as  a  part  of  the 
capital  thereof."  ' 

1  Laws,  1874-5,  170. 

^  Art.  13,  sec.  5.     See  Code  of  1876,  147. 

'Acts  of  1876-7,  199  ;  Code  of  1876,  384-5- 

*  "  It  is  erroneously  supposed  by  many  that  the  interest  annually  accruing  on 
the  i6th  section,  the  vahieless  i6th  section,  and  the  United  States  surplus- 
revenue  funds,  was  the  result  of  a  prudent  investment  of  the  capital  of  those 
funds  in  solvent  securities  ;  but  in  reality  they  have  no  existence  except  upon 
the  books  of  the  State  offices  in  which  said  accounts  are  kept.  The  State 
became  the  trustee,  and  her  debt  long  since  absorbed  them,  and  every  dollar  of 
the  education  fund,  except  the  annual  receipts  from  the  sale  of  school  lands  is 
now  directly  derived  from  the  revenues  of  the  State." — Report  of  H.  Clay  Arm- 
strong, State  Supt.  of  Ed.,  1882,  p.  7. 


free  Library  »""^^3,^>«*,i*. 


48  SURPLUS  REVENUE. 

June  12,  1837,  the  Bank  of  the  State  of  Arkansas  began  business 
with  a  capital  of  $413,105.29,  of  which  $286,156.49  was  derived 
from  the  surplus.'  The  bank  suspended  specie  payments  imme- 
diately, and  consequently  did  a  limited  business  for  a  while.  The 
next  reference  to  the  surplus  appears  in  1843.  On  February  ist, 
the  Legislature  passed  a  bill  over  the  governor's  veto,  ordering 
the  State  Bank  "  to  reimburse  the  State  "  $15,000  in  specie  from 
the  surplus  revenue  to  meet  an  appropriation.* 

On  the  3d  of  February  this  first  step  was  followed  by  a  general 
act,  the  second  section  of  which  runs  as  follows  :  "  Whenever  the 
ordinary  revenue  in  the  treasury  shall  not  be  sufficient  to  meet  and 
discharge  warrants  drawn  under  appropriations  made,  or  which 
shall  be  made  by  law,  a  sufficient  sum  of  the  surplus-revenue  fund 
shall  be  used  for  the  payment  of  such  warrants."  ' 

This  act,  we  are  told  by  Gov.  Roane,  in  1852,  was  the  result  of 
general  bad  management.  When  the  banks  suspended,  they  were 
allowed  ten  years,  during  which  they  were  to  liquidate  their  debts. 
By  this  course  their  indebtedness  became  "  confirmed  as  an  ac- 
count of  the  State."  '  Such  a  condition  of  affairs  discouraged 
emigration,  and  "  the  legislators  lost  confidence  in  the  State  Gov- 
ernment and  began  to  try  to  secure  their  districts  as  much  treasure 
as  possible."  So,  to  save  their  constituents  from  taxation,  they 
used  up  the  surplus  for  the  State  expenses,  and,  to  be  sure  that 
they  and  their  friends  got  something  before  general  dissolution 
came,  they  divided  the  seminary  fund  and  the  proceeds  of  the 
500,000  acres  given  for  internal  improvements  among  the    coun- 

'  Trotter,  337  and  450. 

=  Acts  of  Arkansas,  1842-3,  105.  'English,  962  ;  Gould,  1047. 

*  "  The  State  debt  had  its  origin  in  the  suspension  of  the  business  of  the  two 
banks  chartered  by  the  Legislature  shortly  after  the  organization  of  the  State 
Government.  In  order  to  procure  a  capital  fund  upon  which  to  base  their  op- 
erations, bonds  to  the  amount  of  $2,827,000  were  sold,  for  the  redemption  of 
which  the  faith  of  the  State  was  pledged.  After  their  suspension,  these  banks 
were  placed  in  liquidation  by  an  act  of  the  Legislature,  which  extended  the  time 
of  payment  to  those  indebted  for  ten  years  ;  by  which  injudicious  policy  the 
amount  of  their  indebtedness  was  confined  as  an  account  of  the  State."— Gov. 
Roane's  Mess.,  Nov.,  1S52  ;   Am.  Statist.  Ann.,  185^,  pp.  165-6. 


SURPLUS  REVENUE.  49 

ties.  This  bad  policy  dispirited  the  people  and  hindered  the 
growth  of  the  State.' 

But  before  the  surplus  was  used  up,  attempts  were  made  to  save 
some  of  it  for  educational  purposes.  On  the  same  day  that  it  was 
made  subject  to  appropriation,  an  act,  establishing  a  system  of 
common  schools,  was  passed,  in  which  it  was  provided  (Sec.  41)  : 
"  that  so  much  of  the  surplus  revenue  of  the  United  States,  dis- 
tributed to  the  State  of  Arkansas,  as  shall  remain  unappropriated 
after  the  final  adjournment  of  the  present  General  Assembly,  shall 
form  a  capital  for  the  use,  benefit,  and  support  of  common  schools 
in  this  State."  The  interest  was  made  payable  to  the  counties  in 
the  ratio  of  white  population.^ 

If  the  friends  of  education  hoped  for  much  help  from  the  sur- 
plus, their  hopes  were  in  vain,  for  the  fund  was  almost  entirely 
used  up  at  or  near  the  end  of  the  session.' 

If  they  hoped  much  from  the  law,  their  hopes  were  equally  vain, 
for  it  was  a  dead  letter.  It  did  not  even  protect  the  little  rem- 
nant of  the  surplus.  In  October,  1846,  there  was  $13,830.95  of 
this  money  to  the  credit  of  the  State  in  the  bank,  and  very  soon 
after  $4,667.19  was  drawn."  The  $9,163.76,  left  to  the  credit  of 
the  State,  and  nominally  an  educational  fund,  appears  on  the  books 
as  late  as  October,  1850,^  It  is  altogether  probable,  however, 
that  this  small  remnant  soon  followed  the  rest  of  the  surplus."  The 
law,  in  fact,  was  too  complicated.  As  late  as  1848,  the  system 
had  not  been  organized,  and  nobody  believed  that  it  would  be." 

The  people  were  perfectly  indifferent  on  the  subject ; '  and,  how- 
ever bountiful  their  resources  might  have  been,  or  how  liberal 

'  Gov.  Roane:    Am.  Statist.  Ann.,  1854,  162. 

^  Acts  of  1842-3,  138.     Am.  Aim.,  1845,  266. 

'  Gov.  Drew  :   i  Bankers'  Mag.,  p.  429. 

^  Auditor's  Report,  Table  B  ;  Acts,  1848-9,  2l6. 

^  Report,  Table  D  ;  Acts,  1850-1,  320. 

■^  It  will  surprise  no  student  of  banking  in  this  period  to  learn  that,  though  the 
surplus  was  almost  entirely  drawn  from  the  bank,  it  was  still  represented  as  a 
basis  for  a  corresponding  amount  of  notes  of  the  State  Bank  in  circulation. — 
I  Bankers'  Mag.,  432. 

'  Am.  Aim.,  1856,  309. 


50  SURPLUS  REVENUE. 

soever  their  laws,  their  own  indifference  would  have  rendered  their 
resources  useless  and  their  laws  without  effect. 

We  could  have  no  better  example  of  the  truth,  that  it  is  public 
sentiment  which  gives  life  to  laws,  or  no  better  justification  of 
that  only  sound  principle  which  makes  local  taxation  the  proper 
source  from  which  to  draw  the  supplies  for  local  wants. 

If  Arkansas  had  had  a  school  fund  of  a  million  dollars,  it  would 

soon  have  gone  the  way  of  the  surplus  fund,  taking  the  place  of 

taxation  for  governmental  wants  ;  or  the  way  of  the  seminary  fund, 

to  satisfy  the  greed  of  local  politicians.     The  surplus  revenue  did 

Arkansas  no  good,  but  rather  much  harm,  for  its  presence  led  to 

corruption,  and,  finally,  relieved  the  people  of  taxation  at  a  time 

when  they  most  needed  it,  and  when  relief  therefrom  only  sowed 

the  seeds  of  future  backwardness  in  meeting   their  obligations. 

Arkansas  failed  to  pay  the  interest  on  that  bank  debt  for  thirty 

years,  and,  consequently,  was  numbered  among  the  repudiating 

States.' 

Connecticut  Received  $764,670.60. 

An  extra  session  of  the  Legislature  was  called  to  meet  Dec.  21, 
1836,  mainly  to  consider  the  question  of  the  deposit  money.'* 
The  governor  recommended  that  the  school-fund  commissioners 
loan  it  on  mortgage  and  add  the  interest  to  the  school  fund.' 
There  was  a  stormy  and  confused  discussion  for  nine  days,  and 
many  propositions  were  advanced.  A  bill  was  finally  passed  Dec. 
29,  1836,  with  two  dissenting  voices  in  the  House  and  one  in  the 
Senate.*  The  act  provided  that  the  money  be  deposited  with  the 
towns  which  might  receive  it  on  condition  that  they  should  keep 
and  preserve  the  money  as  a  deposit.  The  principal  was  to  be 
loaned  on  good  security  at  the  legal  rate  of  interest,  and  the  entire 
income  appropiated  annually  ;  "  at  least  one  half  thereof  for  the 
promotion  of  education  in  common  schools  in  such  manner  and 
proportions  as  the  towns  may  direct ;  and  the  remainder  for  the 

'  Hunt's  Merchants'  Mag.  Year-Book,  203. 
"  For  further  particulars  see  page  32. 
^  New  Haven  Herald,  Dec.  21,  1836. 
^Nexo  Haven  Herald,  Dec,  27,  1836. 


SURPLUS  REVENUE.  5  I 

ordinary  expenses  of  such  town  and  for  no  other  purpose." 
"The  principal  of  this  fund  shall  remain  permanent,  and  no  part 
of  it  shall  ever  be  used  for  any  purposes  other  than  those  desig- 
nated in  the  act."  ' 

If  the  towns  failed  to  make  good  the  losses  to  the  principal 
within  one  year  after  the  same  should  occur,  such  towns  should 
forfeit  a  sum*equal  to  the  whole  amount  received  from  the  treasury. 
When  towns  refused  their  shares  the  treasury  should  loan  them  at 
the  expense  of  the  said  towns ;  °  and  when  the  towns  were  divided 
the  surplus  also  should  be  divided  proportionately.^  For  nearly 
twenty  years,  about  three  quarters  of  the  income  from  the  fund,  or 
about  $33,000,  was  devoted  to  schools.''  Then  came  the  act  of 
June  30,  1855,  by  which  the  whole  income  was  applied  to  schools  ; 
one  half  to  be  divided  pro  rata  among  the  districts,  and  one  half 
distributed  under  the  direction  of  the  selectmen  and  town 
treasurer.^ 

Of  late  years  the  income  has  been  diminishing  very  rapidly  either 
from  losses,  lower  interest,  or  from  unproductiveness  of  the  funds." 

'  This  and  the  following  provisions  are  dead  letters  now. 

"  The  towns  of  Berlin,  Grandby,  Wethersfield,  Brandford,  North  Brandford, 
Southbury,  and  Bolton  did  not  draw  their  shares,  but  invested  them  in  State 
bonds  and  still  draw  their  interest. 

'Laws,  1837,  61  ff.  Gen'l  St.,  593-8.     Eaton,  14. 

*"A  second  and  considerable  source  to  meet  the  school  expense  is  half  the 
income  of  the  '  Town  Deposit  Fund,'  amounting  to  $764,670.61  and  such  por- 
tion of  the  remainder  as  the  towns  may  appropriate  to  education  in  common 
schools.  As  far  as  heard  from,  about  one  half  of  the  remainder  is  devoted  to 
this  object — making  an  aggregate  income  of  over  $33,000.  This  amount  is,  in 
most  of  the  towns,  distributed  to  the  school  societies,  and  through  them  to  the 
districts,  on  the  same  principle  as  the  avails  of  the  School  Fund.  In  quite  a 
large  number  it  is  divided  equally  to  the  districts  without  reference  to  the  enum- 
eration. This  is  done  to  give  additional  aid  to  weak  districts.  The  annual 
appropriation  of  this  fund  is  one  of  the  '  vexed  questions '  of  town  meetings." 

First  Annual  Report  of  the  Secretary  of  the  School  Board,  Henry  Barnard. 
Connecticut  Common  School  Journal  (1838),  161. 

'  Laws  of  1855,  105. 

°  The  income  was  $48,078.92  in  1866,  wavered  between  that  and  $43>985-75 
in  1869,  averaging  about  $45,000.  Since  1877  when  the  income  was  $47,665 
it  has  steadily  sunk  to  $42,156.28  in  1884.— Report  of  Sec'y  of  Ed.,  1884,  21. 


52  SURPLUS  REVENUE. 

The  following  is  from  the  last  school  report  :  "  The  fund  origi- 
nally amounted  to  ^763,661.83  and  has  somewhat  diminished. 
The  principal  has  in  many  cases  been  borrowed  and  used  by  the 
towns,  and  exists  only  in  the  form  of  town  orders,  upon  which  the 
towns  pay  interest.  The  result  is  that  it  does  not  in  fact  add  to 
the  school  resources.  The  town  must  raise  this  interest,  which  is 
accounted  a  town  charge,  and  instead  of  actually  increasing  school 
resources  there  is  simply  a  transfer  of  charges  on  the  books.  It 
cannot  be  said  that  this  is  within  the  intent  of  the  law,  which  re- 
quires the  interest  to  be  actually  devoted  to  the  maintenance  of 
schools."  '  Some  towns  have  lost  more  or  less  of  the  money  and 
not  refunded  it. 

Delaware  Received  $286,751.49. 

The  share  of  the  surplus  that  fell  to  Delaware  was  exactly  one 
tenth  of  the  share  of  Pennsylvania,  and  about  one  hundredth  of 
the  whole  sum  deposited.  As  Delaware  invested  the  surplus,  we 
will  first  see  what  the  investments  were,  and  then  what  was  done 
with  the  income  therefrom.  The  money  was  accepted  January 
16,  1837,  to  be  deposited  in  the  Farmers'  Bank,  of  the  State  of 
Delaware,  at  Dover.  At  the  same  place  the  subsequently  accru- 
ing dividends^  were  to  be  deposited.  By  an  act  to  authorize  the 
building  of  a  court-house,  etc.,  at  Georgetown,  Sussex  County, 
"  the  State  Treasurer  was  to  pay  the  building  commissioners 
$5,000  from  the  surplus  fund  of  this  State,  to  be  used  in  the 
erection  of  this  building."  Sussex  County  was  to  pay  six  per  cent, 
interest  on  this  loan,  which  was  to  be  deducted  from  her  share  of 
the  annual  interest  from  the  surplus  revenue.' 

Four  days  later  a  general  act  was  passed,  providing  for  the  in- 

'  Ibid. 

A  table  of  the  towns  and  their  shares  as  they  existed  in  1847  is  in  the  Report 
of  1876,  pp.  254-5.  Statistics  of  the  state  of  the  fund  in  1881  in  MS.  are  in 
the  Yale  College  library,  and  the  office  of  the  State  Secretary  of  Education  at 
Hartford.  A  thorough  investigation  of  the  matter  at  an  early  day  is  promised 
by  the  Secretary  of  Education. 

=■  Acts,  1837,  64-7. 

'  Act  of  February  17th.     Acts  of  1837,  140. 


SURPLUS  REVENUE.  53 

vestment  of  the  rest.  $250,000  was  to  be  expended  in  baying  5,000 
shares  of  the  increased  stock  of  the  Farmers'  Bank  of  the  State  of 
Delaware,  at  par, — to  wit,  at  $50  per  share.  If  the  whole  amount 
expected  ($382,335.31)  should  not  be  received,  a  sum  bearing  the 
same  ratio  to  what  was  finally  received,  "  after  deducting  the  sums 
already  paid  thereout,"  that  !|25o,ooo  bore  to  the  amount  ex- 
pected, was  to  be  in  Farmers'  Bank  stock.  Further,  $110,000,  or 
a  sum  proportionate  to  the  remainder  of  the  surplus  was  to  be 
lent  for  a  period  not  longer  than  two  years  to  the  Wilmington  and 
Susquehanna  Railroad  Company,  on  approved  security,  provided 
the  company  accepted  their  new  charter.  Any  remaining  portion 
of  the  surplus  was  to  be  loaned  under  the  approval  of  the  Com- 
mittee of  Three,  who  had  charge  of  the  railroad  investment.* 

The  amount  invested  under  this  law,  as  will  appear,  was 
$180,000  for  Farmers'  Bank  stock,  and  $80,793.83  loaned  to  the 
railroad.  Nominally,  however,  $1 10,000  was  loaned  to  the  Wil- 
mington and  Susquehanna  Railroad  Company,  and  their  penal 
bond  for  $220,000  was  recorded  January  28,  1839.^  Soon  after- 
wards this  loan  was  extended  to  the  Philadelphia,  Wilmington,  and 
Baltimore  Railroad  for  a  period  of  not  more  ^than  four  years,  at 
the  same  rate  of  interest.  This  was  a  consolidated  road,  which 
had  absorbed  the  Wilmington  and  Susquehanna.'  The  mortgage 
for  this  loan  of  $80,793.83  was  accepted  February  22,  1843.' 
This  loan  was  to  be  extended  under  certain  conditions  till  1860." 

The  remainder  of  the  surplus,  $20,958.49,  was  probably  loaned 
under  the  act,  or  invested  in  some  way.  It  is  now  invested  in 
Smyrna  Bank  stock  and  National  Bank  of  Delaware  stock.' 

To  return  now  to  the  disposition  of  the  income,  February  22, 
1837,  "  An  act  to  provide  for  the  distribution  of  the  interest  of 
the  surplus  revenue"  was  passed.  The  interest  was  to  be  equally 
divided  into  three  parts,  one  part  to  be  for  "  the  use  and  benefit" 

'  Act  of  February  21st.     Acts,  1837,  175-6. 

"^  Acts  of  1S39,  205. 

^  Acts,  1839,  242. 

*  Acts,  1S43,  521  ;  see  also  Revised  Statutes,  1852,  205. 

'  Acts  of  1847,  139-40,  and  Revised  Statutes  (1874),  201. 

'  Statement  of  Supt.  of  Schools. 


54  SURPLUS  REVENUE. 

of  each  of  the  three  counties,  New  Castle,  Kent,  and  Sussex. 
The  shares  falling  to  Kent  and  New  Castle  counties  were  to  be 
used  for  schools,  but  the  share  of  Sussex  County  was  to  be  re- 
divided,  one  third  being  set  apart  for  schools,  and  two  thirds  to 
pay  the  poor  tax  of  the  county  ;  and  the  treasurer  was  to  see  that 
each  county  received  as  nearly  equal  benefit  as  possible,  keeping 
in  mind  the  loan  to  Sussex  County/  By  an  amendment,  Febru- 
ary 12,  1845,  the  whole  of  the  share  of  Sussex  was  to  be  appro- 
priated to  schools.* 

The  certificates  of  the  Phil,  Wilmington,  and  Baltimore  Railroad, 
which  were  bought  with  the  surplus  and  which  the  school  fund 
owned,  amounted  at  their  par  value  to  $85, 000.  The  fund  paid 
$80,793.83  for  them,  and  finally  sold  them  in  1881  for  $131,750. 
Thereupon  a  single  bond  of  $156,750  was  issued  for  this  sum  and 
for  $25,000  proceeds  of  some  stock  in  the  New  Castle  and  Wil- 
mington Railroad,  previously  extinguished  and  paid  in,  but  be- 
longing to  the  school  fund.^ 

The  income  from  the  investments  made  of  the  surplus  revenue 
is  apportioned  among  the  school  districts,  and  comprises  the  divi- 
dends on  5,000  shares  of  Farmers'  Bank  stock,  for  which  $36  per 
share  was  paid  ;  the  dividends  on  the  $20,958.49  invested  in  stock 
of  the  Smyrna  Bank  and  of  the  National  Bank  of  Delaware  ; 
"  the  interest  on  $131,750  of  the  above-mentioned  bond  for  $156, 
750  of  the  State  of  Delaware  to  the  school  funds  of  said  State,  at  six 
per  cent,  interest,  issued  under  chap.  324,  v.  16,  and  the  interest 
on  the  sum  of  $5,000  advanced  to  the  county  of  Sussex."* 

To  summarize  now.     Of  the  surplus, 
$180,000  00  was  invested  in  Farmers'  Bank  stock, 

80,793  °°  was  loaned  to  the  Phil.,  Wil.,  and  Bait.  R.  R., 
5,000  00      "         "        "  Sussex  County, 
20,958  49  was  invested  or  loaned. 

$286,751  49 

'  Acts,  1837,  187-8,  Eaton,  16. 

*  Acts,  1845,  41,  Eaton,  16. 

'Act  of  March  29th  ;  Laws,  iSSi,  318-9. 

*  Digest  of  School  Laws,  1881,  Art.  13,  p.  30. 


SURPLUS  REVENUE.  55 

Now,  supposing  the  bank  stock  to  be  worth  only  $180,000, 
though  it  is  really  worth  more  than  %T,(i  per  share,'  and  assuming 
that  the  Smyrna  Bank  stock  and  National  Bank  of  Delaware  stock 
to  be  at  par,  we  find  that  the  Delaware  school  fund  owns  securi- 
ties worth  $337,708.49,  or  more,  obtained  by  an  investment 
of  $286,751.49  surplus  revenue.  Thus  Delaware  stands  far 
ahead  of  all  the  States  that  received  the  surplus,  for  she  has 
now  far  more  to  show  for  it  than  she  received,  besides  a  yearly  in- 
come of  $15,000^  for  the  support  of  schools.  At  present  the 
income  of  the  permanent  school  fund,  including  the  $286,751.49 
surplus  revenue,  with  the  revenue  from  licenses,  amounts  to  over 
$25,000  a  year,  and  obviates  the  necessity  of  a  State  tax  for 
schools. ° 


'  The  Supt.  of  Schools  is  the  authority  for  this. 

'Eaton,  17. 

'  5th  Ann.  Report  of  Schools,  18S0,  53. 


CHAPTER  VII. 

the  surplus  in  the  states. 
Georgia  Received  $1,051,422.09. 

When  the  Legislature  met  in  Nov.,  1836,  Gov.  Schley  said  in 
his  message  :  "  Declarations  at  the  time  of  its  enactment  (/.  e.,  the 
Deposit  Act),  and  since  by  some  of  its  ablest  advocates,  that  these 
deposits  were  intended  as  donations  never  to  be  reclaimed  ;  and  the 
simultaneous  avowal  by  the  great  beneficiaries  of  the  tariff,  that 
this  policy  was  to  become  a  system  to  conciliate  the  complaining 
States,  are  calculated  to  excite  a  jealous  watchfulness  of  the  innova- 
tion. .  .  .  The  framers  of  the  Constitution  never  could  have  con- 
templated the  accumulation  of  redundant  revenues  to  foster  par- 
ticular interests  in  its  collection,  and  to  subsidize  others  in  its 
distribution."  Further,  Georgia  had  ample  resources  of  her  own, 
and  her  people  were  too  proud  to  be  the  beneficiaries  of  the 
National  Government.  Georgia  should  solemnly  protest  and  call 
for  a  reduction  of  the  tariff.  It  was  best  to  loan  the  deposit  on 
good  security,  that  it  might  easily  be  returned,  and  to  apply  the 
interest  to  the  State  expenses.' 

The  Legislature  followed  this  advice,  and  in  their  acceptance, 
Dec.  26th,  uttered  a  vehement  protest  against  distribution,  affirm- 
ing that  they  would  have  refused  the  deposit  had  it  not  been  for 
the  provision  that  the  share  of  any  refusing  State  should  be  divided 
among  the  other  States. 

Two  days  later  an  act  was  passed  directing  that  the  money  be 
deposited  in  the  Central  Bank  of  Ga.,  and  loaned  to  the  public 
like  other  funds,  under  the  regulation  for  discounting  notes  ;  it 
was  also  to  be  loaned  to  sound  banks  in  which  the  State  was  a 
stockholder,  to  be  repaid  at  sixty  days'  notice,  under  a  penalty  of 

'  51  Niles,  207. 

56 


SURPLUS  REVENUE.  57 

twenty-five  per  cent,  damages,  besides  interest.  The  interest  on 
the  loans  was  to  be  disposed  of  according  to  subsequent  acts.' 

Dec.  26,  1837,  "  An  act  to  establish  a  system  of  education  by 
common  schools  "  was  passed,  by  which  the  academic  and  poor 
school  funds  were  consolidated,  and  together  with  the  interest  on 
one  third  part  of  the  surplus  revenue  were  formed  into  a  common 
school  fund.^  This  act  was  repealed  two  years  later,  and  the 
funds  were  constituted  into  a  poor  school  fund/  The  appropria- 
tion of  the  common  school  fund  for  1840,  under  the  laws  of  1837 
and  1838,  amounted  to  $100,646.89.* 

But  these  school  laws  were  not  supported  by  public  sentiment, 
and  so  easily  became  dead-letters.  In  1870  it  was  stated  on  the 
best  authority  that  the  school  fund  ^  was  being  paid  into  the  treasury, 
and  as  it  was  not  kept  separate  from  other  funds,  it  was  used  to 
pay  members  of  the  General  Assembly,  or  other  expenses.  The 
same  writer  continues  :  "  And  indeed  all  the  school  fund  had  been 
paid  out  in  this  way  before  the  date  to  establish  [sic)  a  common 
school  system.  ...  It  has  been  paid  out  as  fast  as  received 
into  the  treasury  ever  since.  It  is  now  being  paid  to  the  members 
of  the  General  Assembly,  and  to  meet  other  expenses  of  the  State."" 

'  Prince,  837  ;  Hotchkiss,  140-2  ;  see  also  51  Niles,  305,  and  Eaton,  17. 

='Acts,  1837,  94. 

^  Acts,  1840,  61.  Mr.  Eaton  traces  at  some  length  the  changes  which  this 
fund  underwent.  As  his  address  is  in  every  considerable  library,  or  can  be  got 
by  writing  for  it,  it  is  unnecessary  to  reprint  the  matter,  especially  as  educa- 
tional interests  got  little  benefit  from  the  fund. 

*  Acts,  1840,  53  ;  Appendix.  "Fund"  here  doubtless  means  "income"  of 
the  fund. 

'  I  suppose  this  means  the  income  from  school  funds. 

^  Supt.  Lewis,  p.  3  of  an  open  letter  to  the  teachers  of  the  State,  appended  to 
the  Report  of  1871.  I  am  not  certain  what  he  means  by  "  the  date  to  establish 
a  common  school  system,"  but  I  suppose  the  reference  is  to  the  law  of  1837. 
(See  above.) 

There  must  have  been  exceptions  to  the  general  practice  here  described,  if  I 
have  rightly  understood  Mr.  Lewis'  meaning,  for  in  1839  it  was  stated  that  the 
annual  appropriations  from  various  funds  for  purposes  of  general  education 
amounted  to  about  $60,000 — a  sum  which  was  deemed  wholly  inadequate  to  the 
wants  of  the  State.  The  governor  was  of  the  opinion  that  the  present  system  of 
education  should  be  thoroughly  amended  or  abandoned  altogether, —  57  Niles, 202. 


58  SURPLUS  REVENUE. 

This  abuse  was  corrected  in  1870/ 

The  other  two  thirds  of  the  surplus  remained  in  the  Central  Bank, 
and  no  special  appropriation  of  the  interest  has  been  met  with.'^ 
In  the  general  statement  of  the  condition  of  the  Central  Bank 
of  Ga.,  Nov.  7,  1842,  among  the  liabilities  appears  this  item  : 
"United  States  Surplus  Revenue,  $1,051,422.09."^  The  act 
of  Dec.  23,  1840,  contained  the  following  provision  :  The  directors 
of  the  Central  Bank  "  are  hereby  authorized  and  required  to  apply, 
from  time  to  time  as  need  may  be,  so  much  of  the  money  of  {sic) 
the  said  bank,  not  otherwise  appropriated,  as  may  be  sufficient  to 
pay  the  interest  on  the  public  debt."  Furthermore,  an  additional 
sum  was  annually  to  be  applied  to  the  payment  of  the  principal  of 
said  debt.*  This  provision  afforded  ample  means  to  consume  the 
interest  on  the  surplus  without  other  legislation.  In  1841  the  Cen- 
tral Bank  was  in  great  straits  on  account  of  the  severe  encroach- 

'  Laws  of  1870,  61  ;  Act  of  July  28th. 

"^  It  is  stated  in  a  letter  to  Blair's  Globe,  Jan.  14,  1837,  that  these  two  thirds 
were  appropriated  to  building  a  railroad  in  opposition  to  the  Louisville,  Cincin- 
nati, and  Charleston  R.  R.  The  road  meant  is  doubtless  the  Western  and  At- 
lantic, which  was  built  by  the  State,  and  from  the  income  of  which  the  State 
afterward  appropriated  large  sums  for  education.  But  this  assertion  appears 
untrustworthy  compared  with  the  bank  report.  The  State  records  in  the  treas- 
urer's ofifice  at  Atlanta  throw  no  light  upon  the  subject.  In  regard  to  the 
Western  and  Atlantic  R.  R.  it  may  not  be  going  too  far  from  my  subject 
to  state  a  few  facts,  for  this  road  is,  I  think,  almost  the  only  prominent  instance 
of  State  ownership  of  railroads  in  this  country.  The  road  was  built  by  the  State. 
Up  to  Oct.  I,  1839,  it  had  cost  $1,320,144,  all  of  which  save  $250,000  had  been 
raised  by  the  sale  of  State  stocks  (57  Niles,  202).  By  1849  the  debt  incurred  to 
build  the  road  amounted  to  $1,395,250,  and  the  total  cost  of  116  miles  was 
estimated  to  be  $2,300,000.  It  was  hoped  that  the  revenue  derived  from  the 
road  would  be  a  great  help  in  paying  the  State  debt  (4  Bankers'  Mag.,  231-2). 
In  1858  the  State  appropriated  $100,000  a  year  from  the  income  of  the  property 
for  the  benefit  of  schools  (Eaton,  18).  The  road  suffered  during  the  war,  but  was 
refitted,  and  by  the  act  of  Oct.  24,  187,  was  leased  with  its  rolling  stock 
for  twenty  years  "  to  a  corporation  mainly  composed  of  the  officials  of  connec- 
ting roads."  The  lessees  are  under  bonds  of  $8,000,000  to  operate  and  maintain 
the  road  and  pay  "  monthly  "  a  rental  of  $25,000  (Pool's  Manual,  1884,  460). 
The  estimated  value  of  the  road  is  $8,000,000. 

^Bank  Reports  of  Ga.,  1842,  94.  ^  Acts  of  1840,  150. 


SURPLUS  REVENUE.  59 

ments  upon  its  capital  from  the  acts  of  the  Legislature/  but  it 
continued  to  exist  a  dozen  years  more,  and  then  went  into  liqui- 
dation. Gov.  Howell  Cobb  said  in  1853  :  "  On  careful  examina- 
tion of  the  affairs  of  the  Central  Bank,  it  appears  that  after 
exhausting  its  resources,  there  will  be  left  the  amount  of  $369,500, 
which  must  be  paid  from  the  treasury."^ 

It  seems,  then,  that  the  surplus  in  Georgia  was  used  up  in  one 
way  and  another,  some  of  it  doubtless  having  been  lost  on  bad 
loans.  Not  nearly  so  much  help  was  derived  from  it  for  educa- 
tion as  would  appear  from  a  superficial  examination.  It  went  as 
the  other  State  funds  went,  economically  or  extravagantly  accord- 
ing to  the  quality  of  the  prevailing  administration. 

Illinois  Received  $477,919.14. 

The  deposit  was  accepted  December  17,  1836,  and  the  most  of 
it  was  deposited  in  the  bank  of  the  State.'  On  February  27, 
1837,  was  passed  an  act  which  involved  Illinois  in  disaster  and 
debt.  It  was  entitled  "  An  act  to  establish  and  maintain  a  gen- 
eral system  of  internal  improvements."  Among  the  resources  from 
which  the  fund  for  this  purpose  was  to  be  drawn  are  enumerated  : 
"  Moneys  to  be  received  from  the  treasury  of  the  United  States," 
by  the  act  providing  for  a  distribution  of  surplus  revenue.  When 
the  United  States  should  demand  it,  payment  was  to  be  made  out 
of  the  fund  for  internal  improvements.* 

'  Gov.  MacDonald,  5  Hazard,  307. 

^  Message,  Amer.  Statist.  Ann.,  1854,  202. 

*  Acts  1836-7,  193.  Some  additional  act  is  referred  to  here  :  "  The  Legis- 
lature of  Illinois  has  instructed  the  agent  of  that  State  to  demand  and  receive 
the  surphis  in  specie,  from  the  institution  on  which  the  treasury  draft  may  be 
given." — Boston  Recorder,  February  3,  1837.  I  have  read  somewhere  that  the 
specie  was  transported  in  ox-carts  under  great  difficulties.  The  cost  of  collect- 
ing first  instalment  was  $807.  (Treas.  Report,  Laws  of  Special  Sess.,  125.)  In 
consequence  of  this  law  Gov.  Duncan  called  a  special  session  of  the  Legislature 
June  5,  1837,  to  consider  among  other  things  what  to  do  about  the  later  instal- 
ments of  the  surplus,  as  the  deposit  banks  had  suspended  specie  payments.  (52 
Niles,  291  and  359.) 

^  Acts,  1837,  137. 


6o  SURPLUS  REVENUE. 

March  4th,  "  An  act  amending  several  acts"  in  relation  to  com- 
mon schools,  was  passed  to  be  put  in  force  immediately.  It  con- 
tained the  provision  :  "  All  monies  which  may  be  received  into 
the  State  under  the  provisions  of  any  act  of  Congress  directing  or 
authorizing  any  part  of  the  revenue  of  the  United  States  to  be  de- 
posited in  the  State  treasury,  except  that  which  has  been  appro- 
priated to  purposes  of  internal  improvement,  shall  be  added  to 
and  form  a  part  of  the  common  school  fund  of  the  State, 
and  shall  be  loaned  to  the  State  on  the  same  terms  upon 
which  the  seminary  and  school  funds  have  heretofore  been 
loaned."  ' 

Fortunately  an  interpretation  for  this  rather  ambiguous  law  was 
found,  and  a  very  arbitrary  interpretation  it  was  ;  perhaps,  how- 
ever, no  other  could  have  been  given.  Auditor  Davis  in  his  next 
report  said  :  "  In  conformity  with  what  I  conceive  to  be  the 
proper  construction  of  the  acts  entitled  [then  follow  the  above 
titles],  I  have  added  to  the  school  fund  $33^.592-32  of  the 
surplus  revenue,  being  the  amount  which  the  State  owed  to  the 
school,  college,  and  seminary  funds  at  the  time  when  the  said  laws 
were  passed."  ^ 

Practically  the  school  fund  got  the  second  and  third  instalments 
and  a  few  thousand  dollars  from  the  first.  In  view  of  the  dis- 
crepancy between  the  internal  improvement  and  common  school 
laws  and  their  uncertain  wording  it  is  probably  due  to  Mr.  Davis 
that  the  school  fund  got  any  thing.  From  his  remarks,  however, 
we  are  not  to  understand  that  the  money  settled  the  debt  of  the 
State  to  the  school  fund  and  restored  that  to  its  integrity,  for  such 
was  not  the  case,  for  the  State  immediately  borrowed  the  surplus 

'  Acts,  1837,  315. 

""  Auditor's  Report.  Laws  at  the  Special  Session,  1837,  120.  "  This  amount 
was  added  and  bears  interest  from  the  following  dates  : 

Amount  loaned  25th  March,  1837  .         .         .     $239,306.38 

2d  May,         "  ...         79,306.38 

29th  Jan.,        "  ...         16,979.56 

$335,592.32" 


SURPLUS  REVENUE.  6 1 

and  used  it  up.'  It  paid  six  per  cent,  interest  on  it,^  to  be  sure,  but 
that  interest  for  a  time  apparently  followed  the  principal,  to  be 
absorbed  in  the  vast  debt  of  the  State,  from  the  contraction  of 
which  no  advantage  was  derived.  In  this  particular  respect  the 
surplus  was  a  great  injury  to  the  State,  for  it  relieved  the  people 
of  taxation  when  they  were  involving  themselves  deeply  in  debt, 
just  the  time  when  the  weight  of  the  coming  burden  should  have 
acted  as  a  brake.'  In  Illinois  the  surplus  was  expended  in  ex- 
travagant and  unsuccessful  improvements — undertakings  which 
in  reckless  management  perhaps  surpass  those  of  any  other  State, 
while  they  gave  rise  to  unparalleled  log-rolling.'' 

The  fortunate  interpretation  of  an  ambiguous  law  secured  an 
interest  charge  for  the  State  school  fund.  It  is  with  doubtful 
propriety,  however,  that  the  surplus  can  be  said  to  have  helped 
education  in  Illinois,  though  it  gave  rise  to  this  interest  charge  on 
the  State  treasury. 

Indiana  Received  $860,254.44. 

The  deposit  was  accepted  Dec.  21,   1836.'     On  Feb.  6,  1837, 

1  In  estimating-lhe  State  debt,  the  $807,585.39  due  to  the  school  fund,  and 
$477,919.44  "  surphis  revenue  which  has  been  remitted  by,  the  General  Govern- 
ment," were  subtracted. — Illinois  Paper,  in  61  Niles,  242.  This  is  the  only  in- 
stance I  remember  where  it  is  stated  as  z.  fact  that  the  U.  S.  had  remitted  the 
surplus,  supposing  "  remitted"  to  mean  "  renounced  their  claims  to." 

"  Seventh  Report  on  Ed,,  132.  The  loan  in  this  book  is  dated  wrongly 
1835  ;  it  should  be  1837,  of  course. — See,  also.  Am.  Aim.,  1854,  306. 

Mn  Feb.,  1841,  the  chairman  of  a  Committee  on  Finance  reported  that 
previous  legislation  on  taxation  had  been_  conducted  on  deceptive  principles, 
and  that,  consequently,  alarm  in  reference  to  taxation  was  prevailing.  "  The 
people  are  led  to  believe  that  they  need  not  now  be  taxed  more  than  they  have 
heretofore  been  ;  while  in  truth  a  large  portion  of  the  State  expenses  have  been 
defrayed  by  applying  the  school  fund  to  this  purpose — a  system  which  cannot 
any  longer  be  pursued." — 4  Hazard,  162. 

"  In  the  foregoing  estimates  I  have  not  put  down  any  thing  to  be  received 
from  the  school  fund.  There  will,  of  course,  be  several  thousand  dollars 
received  from  this  source  within  the  next  two  years,  to  be  used  as  revenue,  un- 
less the  laws  are  changed." — Report  of  Aud.  Davis,  ibid. 

*  The  fuller  consideration  of  internal  improvements  in  Illinois  is  reserved  to 
another  place.— See  chap.  xii.  ^  Laws  of  1836-7,  97. 


62  SURPLUS  REVENUE. 

was  passed  an  act  providing  for  the  distribution  of  the  surplus 
revenue.  It  directed  that  one  half  should  be  loaned  among  the 
counties  in  proportion  to  the  number  of  taxable  polls,  to  be  reap- 
portioned every  five  years,  and  to  be  loaned  only  to  citizens 
residing  in  the  several  counties  in  sums  not  exceeding  $400  '  to 
one  man  at  eight  *  per  cent,  annual  interest.  The  interest  was  to 
be  paid  over  to  the  school  commissioner.  Of  the  other  half, 
$280,000,  or  such  sum  as  should  remain  after  the  appropriation  to 
the  State  capitol,  was  to  be  invested  in  bank  stock. ^ 

As  the  payment  of  the  fourth  instalment  was  postponed  till 
1839,  the  State  issued  bonds  to  the  amount  of  $294,000,  and  ad- 
vanced them  to  the  bank  in  anticipation  of  the  fourth  instalment.* 
About  $577,000  appears  to  have  been  distributed  to  the  counties, 
which  was  a  little  more  than  half ;  consequently  enough  more  was 
given  to  the  bank  to  make  the  division  even." 

Jan.  27,  1836,  an  internal  improvement  law  had  been  passed, 
authorizing  a  loan  of  $10,000,000  to  construct  improvements  at 
the  expense  of  the  State,  which  should  belong  wholly    to    the 

'  $300  is  the  limit  in  tlie  Revised  Statutes  of  1843,  p.  252. 

*  Mr.  Eaton  (p.  ig)  says  the  interest  was  7  per  cent.,  but  the  law  of  1S37 
reads  8  per  cent.  The  interest  is  stated  as  at  7  per  cent,  in  Am.  Aim.,  1854, 
304,  where  it  is  also  said  that  2^  per  cent,  went  to  pay  county  auditors  and 
treasurers. 

^  Acts  1836-7,  3.  This  act  was  somewhat  revised  Feb.  17,  1838,  and  Feb. 
18,  1839  (Acts  1838-9,  30). 

I  have  been  unable  to  find  out  about  the  appropriation  to  the  State  capitol, 
if  there  was  any.  From  the  following  it  would  be  inferred  that  there  was 
none  :  "  The  surplus  has  been  divided,  one  half  placed  in  the  bank,  the  interest 
to  be  applied  to  internal  improvements  ;  the  other  half  to  be  loaned  out  by 
county  commissioners,  and  the  interest  applied  to  support  common  schools." — 
51  Niles,  416.     The  Legislature  adjourned  the  day  the  act  was  passed. 

*  Dillon  573  ;  3  Hazard,  145.  These  bonds  were  redeemed  by  1847.  (Am. 
Statist.  Ann.,  1854,  222.) 

'  The  sum  distributed  to  the  counties  is  stated  differently  in  different  years, 
e.g.,  in  Nov.,  1847,  $580,433.89  (Am.  Aim.,  1849,  301)  ;  Jan.,  1849,  $694,216 
(Am.  Aim.,  1852,  307).  This  is  called  simply  "  S.  R.  Fund,"  and  may  include 
some  of  the  bank  stock  ;  but  in  1852,  under  the  same  title,  the  amount  is  only 
$552,529.92  (Am.  St.  Ann.,  1854,  226).  Eaton,  however,  p.  19,  states  that  ex- 
actly half  was  distributed,  viz.  :  $573,502.96. 


SURPLUS  REVENUE.  63 

State.  Of  the  interest  charges  accruing  on  so  much  of  this  debt 
as  was  contracted,  $40,000  a  year  was  paid  by  the  bank  from  the 
surplus  in  its  hands.'  More  of  the  surplus  was  said  to  be  available 
for  that  purpose  in  1839.' 

In  Feb.,  1841,  a  law  was  passed  providing  for  calling  in  the  sur- 
plus loaned  among  the  counties,  and  investing  it  in  bank  stock. 
If  anybody  who  had  borrowed  of  the  surplus  desired  longer  time, 
it  could  be  granted  him  at  six  per  cent,  interest,  "upon  delivering 
his  note  to  the  proper  branch,  with  sufficient  endorsers  for  the 

sum  he  might  owe."     The  bank  could  then  "  grant  its  usual  indul- 

>»  3 
gences. 

Henceforward  the  data  about  Indiana  are  uncertain  and  unsat- 
isfactory, and  no  help  could  be  obtained  from  the  State  au- 
thorities. 

In  1852,  in  the  Auditor's  Report,  under  the  head  of  "  Surplus 
Revenue  Fund,"  we  find  : 

On  account  of  loans  refunded  .         .         .       Sq^o-SS 

"  "     interest  on  loans      .         ,         .         429.36 

"  "     cost  of  advertising  refunded    .  13-00" 

Now  these  figures  admit  of  no  certain  interpretation  from  the 
facts  at  hand.  They  may  be  said  to  mean  that  nearly  all  the 
money  had  been  refunded  before  1852,  which  accounts  for  the 
small  payment  and  interest  charge.  On  the  other  hand,  these  fig- 
ures are  equally  well  accounted  for  if  Mr.  McCulloch's  statement 
(quoted  below),  that  nearly  all  was  lost,  is  accepted.  Finally,  Mr. 
Eaton  says  the  money  is  now  nearly  all  in  the  counties.  This  ex- 
plains the  small  payment,  but  not  the  small  interest  charge. 
The  reconciliation  or  rejection  of  these  statements  must  be  left  to 
those  who  have  more  information  than  is  at  my  command. 

*  Acts,  1835-6,  6  ;  Trotter,  304. 

"57  Niles,  37. 

^  Acts,  1841,  192.  The  same  use  was  made  of  the  sinking  fund,  the  saline 
fund,  the  college  fund,  and  the  school  fund.  60  Niles,  40.  Yet,  so  far  as  the 
law  referred  to  the  surplus,  it  was  apparently  contradicted  in  the  Revised  Stat- 
utes of  1843,  251,  where  it  is  provided  that  all  money  received  by  the  counties 
from  that  fund  should  be  loaned. 

*Acts,  1853,  155. 


64  SURPLUS  REVENUE. 

By  the  Constitution  of  1851/  the  school  laws  of  1855  '  and  1865, 
the  surplus  was  made  a  part  of  the  school  fund.' 

So  far  as  the  interest  of  Indiana's  share  went  for  internal  im- 
provements, it  was  probably  wasted.'  In  1844  the  debt  of  the  State 
was  $12,218,000.  The  bank  paid  interest  on  $1,390,000,  and  on 
the  rest  no  interest  was  paid,  nor  was  there  any  provision  there- 
for.' In  1846  the  State  compromised  with  her  creditors.  For  the 
old  securities  she  would  substitute  new  bonds  to  the  amount  of 
fifty  per  cent.,  and  give  to  the  holders,  in  lieu  of  the  other  half, 
a  lien  upon  the  canal,  canal  lands,  revenues,  and  lots.  "  In- 
diana has  thus,"  says  a  writer  of  the  time,  "  assumed  the  payment 
of  three  millions  of  dollars,  for  which  nothing  was  ever  realized  by 
the  State.  Not  only  were  the  avails  of  the  bonds  to  a  large 
amount  grossly  squandered  by  the  agents  of  the  State  in  the  con- 
struction of  its  public  works,  but  bonds  to  the  amount  of  three 
millions  thrown  away  by  mismanagement."  '^ 

The  notice  of  the  surplus  in  Indiana  can  best  be  closed  by 
quoting  the  testimony  of  Hon.  Hugh  McCulloch,  at  a  recent  meet- 
ing of  the  Washington  Philosophical  Society  : 

"  Being  invited  by  the  Chair  to  participate  in  the  discussion,  he 
said  that  in  Indiana  the  application  of  the  money  deposited  by  the 
United  States  had  occasioned  a  long  debate,  which  had  resulted 
in  its  division.  One  half,  by  means  of  a  system  of  commissioners, 
was  loaned  to  individuals  on  land  and  mortgage  ;  the  other  half 
was  put  into  stock  of  the  State  Bank,  with  which  the  speaker  was 
at  that  time  connected.  In  a  financial  crisis  the  first  half  was 
practically  lost,  probably  less  than  one  twentieth  part  being  recov- 
ered ;  but  the  loss  was  fortunately  made  good  by  the  bank  stock, 
upon  which  dividends  were  regularly  paid,  and  by  which  the  in- 

'  Art.  8,  §  2  ;  i  Revised  St.,  1852,  62. 

''Acts,  1855,  161. 

'Statutes,  Davis  Rev.,  1876,  779.  "  The  words  lieretofore  known  and  desig- 
nated as  the  surplus  revenue  funds,"  are  the  words  of  the  last.  The  plural 
probably  means  to  include  the  bank's  share. 

*  See  chap.  xii. 

^  Am.  Aim.,  1846,  2S7. 

*  I  Bankers'  Mag.,  262. 


SURPLUS  REVENUE.  65 

vestment  was  eventually  doubled.     Since  the  closing  of  the  bank, 
this  money  has  constituted  the  school  fund  of  Indiana."  ' 

Kentucky  Received  $i,433,754-39- 

Before  the  question  of  the  deposit  came  up  in  the  Legislature, 
one  member  declared  his  intention  of  presenting  a  resolution  to 
appropriate  part  of  the  surplus  revenue  to  African  colonization.^ 
It  is  needless  to  say  that  this  resolution  was  not  adopted,  if  ever 
proposed. 

The  deposit  was  accepted  Dec.  16,  1836,'  and  disposed  of  by 
the  act  of  Feb.  23,  1837,  which  ordered  that  the  surplus  "be 
properly  invested."  The  profits  arising  from  $1,000,000  were  to 
be  "  set  apart  and  forever  dedicated  to  founding  and  sustaining 
a  general  system  of  public  instruction,"  while  the  profits  from  the 
remainder  were  to  form  a  sinking  fund  to  pay  the  interest  on  the 
internal  improvement  loan  and  to  redeem  the  principal  thereof.* 

The  investment  of  the  surplus  under  this  act  was  to  be  as  fol- 
lows :  First,  in  the  purchase  of  5,000  shares  of  stock  in  the  Bank 
of  Louisville  ;  then  f  of  the  residue  were  to  be  paid  on  a  pur- 
chase of  5,000  shares  in  the  Northern  Bank  of  Kentucky  as  the 
later  instalments  come  in  ;  while  the  remaining  f  were  to  be  paid 
on  the  10,000  shares  subscribed  by  the  State  in  the  Bank  of 
Kentucky  not  paid  for  with  State  bonds.  Among  the  conditions, 
it  was  laid  down  that  the  banks  must  comply  with  the  act  within 
three  months,  otherwise  the  surplus  falling  to  them  was  to  be 
handed  over  to  the  Commissioners  of  the  Sinking  Fund.  The 
10,000  shares  of  stock  in  the  Bank  of  Kentucky  were  set  apart 
and  pledged  as  a  fund  for  the  repayment  of  the  surplus  when  it 
should  be  demanded  by  the  United  States.^ 

'  Ne7v  York  Times,  Dec.  31,  1883.  The  last  clause  is  hardly  accurate,  as  the 
school  fund  of  the  State  is  about  $8,000,000.  "A  part  of"  should  follow 
"  constituted." 

''New  York  Joitrnal of  Commerce,  Nov.  2g.  1836. 

'Acts,  1836-7,  4. 

*  Acts,  1836-7,  319  ;  Trotter,  236  ;  Pickett,  220. 

'Acts,  1S36-7,  319. 


^6  SURPLUS  REVENUE. 

As  Kentucky  received  only  three  fourths  of  what  was  expected, 
the  million  dollar  appropriation  to  education  was  reduced  to 
$850,000,  with  the  provision  that  if  the  fourth  instalment  should 
be  paid,  $150,000  should  be  added  to  this  sum.  This  fund  was 
placed  under  the  management  of  the  Commissioners  of  the  Sink- 
ing Fund  till  the  school  board  should  be  organized.' 

By  the  act  of  Feb.  23,  1839,  it  was  provided  that  the  interest 
which  had  accrued  or  should  accrue  beyond  the  present  expenses, 
should  be  invested  in  State  internal  improvement  bonds  or  in 
State  Bank  stock,  as  the  commissioners  chose.* 

The  conditions  above  referred  to  in  reference  to  a  purchase  of 
bank  stock  were  not  fulfilled  apparently,  for  the  investments  were 
not  made  as  provided.  In  June,  1841,  James  Harlan,  Secretary 
of  State,  made  a  special  report  on  the  State  Bank,  and  gave  therein 
the  following  particulars  about  the  surplus  :  "  The  whole  amount 
of  the  Surplus  Revenue  of  the  United  States  received  by  the  State 
of  Kentucky  was  $1,433,757.58.  Of  this  $850,000  was  set  apart 
as  a  permanent  school  fund  and  invested  in  internal  improvement 
bonds.'  A  portion  of  the  dividends  have  been  reinvested  in  the 
same  manner,  and  the  accumulated  amount  now  is  $937,500.  The 
residue  of  the  surplus  was  subscribed  and  paid  into  the  Bank  of 
Kentucky,  as  a  part  of  the  fifth  million  in  the  capital  stock  of  that 
bank." ' 

The  Commissioners  of  the  Sinking  Fund  who  had  charge  of  the 
part  of  the  surplus  devoted  to  education  were  frequently  involved 
in  conflicts  with  the  Superintendent  of  Public  Instruction,  and 
the  strife  ended  in  an  issue  with  the  governor  in  1850-1.  "  The 
differences  arose  as  early  as  1840  on  the  refusal  [of  the  Commis- 
sioners] to  pay  the  interest  on  the  school  fund  consequent  on  the 
result  of  the  system  of  internal  improvements  upon  which  the 
State  had  embarked,  leaving  a  depleted  treasury  and  an  im- 
paired  State   credit,"      An   additional     bond    for    accumulated 

'  Acts,  1837-8,  274  ;  Pickett,  ibid. 

"Acts  1838-9,  355. 

'  These  were  State  bonds  with  interest  at  five  per  cent.     Eaton,  19. 

*  5  Hazard,  64  ;  also  60  Niles,  120. 


SURPLUS  REVENUE.  6/ 

arrearages  was  executed  in  1848,  representing  the  sum  of  S308,- 
268.42.' 

The  income  of  the  school  fund  was  about  $50,000  in  1839.' 
But  the  organization  of  the  system  went  on  slowly,  or  rather  there 
was  no  system  for  several  years.  In  1840  the  governor  said  : 
"  No  school  has  yet  gone  into  operation,  as  no  law  for  enumerating 
the  children  was  passed  till  the  last  session  of  the  Legislature. 
Several  schools  will  be  organized  the  present  year,"  ' 

There  was  urgent  need  of  a  good  organization  and  efficient 
schools,"  but  the  work  was  slowly  done  or  not  done  at  all.  In 
1847  Gov.  Owsley  said  :  "  As  yet  for  this  great  cause  Kentucky 
has  done  but  little  more  than  place  a  law  in  her  statute  book  which 

*  See  Pickett,  220.  He  gives  here  full  particulars  about  the  history  and  con- 
dition of  the  State  school  fund.  The  executive  referred  to  was  Gov.  Helm, 
who  affirmed  that  by  the  new  Constitution  the  sinking  fund  was  not  chargeable 
with  this  interest.  5  Bankers'  Mag.,  626.  The  act  of  Feb.  10,  1845,  gave 
some  color  to  the  refusal  of  the  commissioners,  for  it  reappropriated  the  $850,- 
000  for  schools  and  left  out  the  clause  referring  to  the  sinking  fund  (see  Acts, 
1844-5,  45)-  Ii^  addition  to  the  failure  of  the  internal  improvements  the  Bank 
of  Kentucky  declared  no  dividend  in  1840  on  account  of  a  great  fraud  upon  it, 
perpetrated  by  the  Schuylkill  Bank  of  Philadelphia  (see  4  Hazard,  167-72). 
Usually  the  income  of  the  sinking  fund  met  all  demands  for  interest  and  had 
a  large  surplus  left  over  for  investment,  but  in  1840  there  was  a  deficit  of 
$10,802,  because  there  were  no  dividends  from  its  bank  stock.  Harlan's  Re- 
port, 5  Hazard,  64  ;  60  Niles,  120.  In  1841  there  was  a  deficit  in  the  State 
treasury.     4  Hazard,  167-72. 

^  2  Hazard,  277. 

'Gov,  Wickliff's  Message,  June,  1840.     3  Hazard,  59  ;  58  Niles,  146. 

*  Bishop  Smith,  Supt.  of  Public  Schools,  stated  in  an  address  that  of  140,000 
children  of  school  age,  only  32,000  were  receiving  education  ;  also  that  under 
the  then  existing  system  it  cost  about  as  much  to  educate  the  32,000  as  it  would 
to  educate  the  whole  140,000  under  the  common  school  system.  "  In  one  of 
the  circuit  courts  the  judge  ascertained  that  not  one  of  the  fifteen  persons  sum- 
moned as  grand  jurors  could  read  or  write  his  own  name  !  In  another  county, 
in  a  public  assembly  of  about  fifty  persons,  not  one  could  be  found  capable  of 
reading  and  attesting  an  instrument  of  writing." — 3  Hazard,  379. 

It  is  fair  to  add  that  this  report  was  pronounced  most  egregiously  inaccurate 
by  the  Frankfort  Commomvealth,  which  asserted  that  there  were  vastly  more 
schools  and  scholars  than  there  were  said  to  be. — 59  Niles,  375.  Of  the  value 
of  this  statement  I  know  nothing. 


68  SURPLUS  REVENUE. 

has  never  been  carried  into  effect,  and  almost  justified  the  re- 
proach that  a  system  of  education  cannot  flourish  in  a  slave 
State."  ' 

In  1849  the  school  fund  was  stated  to  be  $1,299,268.42  and  the 
interest  $66,733.99,  three  fourths  of  which  were  "retained  in  the 
treasury  and  appropriated  by  the  State  to  its  ordinary  expendi- 
tures." ^  It  was,  however,  considered  as  borrrowed  from  the 
school  fund  which  thus  rapidly  increased  in  size,  for  these  loans 
were  added  to  the  principal  which  the  State  had  borrowed  on  its 
bonds. 

In  1851  the  State  owed  the  Board  of  Education  $1,326,770.40,^ 
which  included  the  $850,000  of  surplus,  or  most  of  it,  and  the  ac- 
cumulating interest  thereon. 

At  first  sight  one  might  name  Kentucky  among  those  States 
which  have  preserved  a  portion  of  the  surplus  to  the  present  day, 
and,  technically,  this  would  be  correct,  but  the  deposit  was  in- 
vested in  bonds  issued  to  obtain  money  for  improvements,  and, 
since  the  improvements  did  not  pay,  the  interest  on  the  bonds  had 
to  be  met  by  taxation  ;  consequently  the  people  pay  annually  by 
their  taxes  what  is  nominally  the  income  of  the  surplus.  This  is 
true  of  course  only  of  so  much  of  the  surplus  as  was  invested  in 
improvement  bonds. 

Louisiana  Received  $447,919.14. 

The  deposit  was  accepted  March  13,  1837.^  By  the  act  of  Feb- 
ruary 26,  1838,  the  treasurer  of  the  State  was  authorized  to  apply 
$355,000  to  the  full  payment  and  extinguishment  of  the  floating 
debt  of  the  State,  due  the  different  banks  of  this  State,  and  of  the 
balance  due  by  the  State  for  its  subscription  of  five  hundred 
shares  of  stock  of  the  Barataria  and  La  Fourche  Canal  Company. 
From  the  residue  of  the  surplus  the  treasurer  was  to  pay  the  bal- 
ance of  the  appropriations  made  by  law  and  due  to  the  College 
of  Louisiana,  to  Jefferson  College,  to  Franklin  College,  to  the 
Covington   Female   Academy,  and  to  the   Penitentiary  at  Baton 


'  73  Niles,  334.  ^  Am.  Aim.,  1853,  294. 

Am.  Ahn.,  1851,  273.  "  Acts,  1837,  74. 


3 


SURPLUS  REVENUE.  69 

Rouge.  Whatever  might  be  left  was  to  be  put  to  the  credit  of 
the  sinking  fund  and  applied  to  the  payment  of  State  bonds  due 
July,  1839/ 

The  next  provision  in  regard  to  the  surplus  is  in  the  137th  Ar- 
ticle of  the  Constitution  of  1852,  which  appropriated  the  interest 
of  the  trust  funds  deposited  by  the  United  States  under  the  act  of 
June  23,  1836,  to  schools.  In  consequence  of  this,  we  find  among 
the  items  of  the  State  debt  due  the  free  school  fund  up.  to 
December  31,  1852:  "Interest  accrued  during  1852  on  the 
United  States  deposit  fund,  $28,795.14.'  This  constitutional 
enactment  was  repeated  in  the  Constitution  of  1864,  Art.  144,  and 
in  the  Constitution  of  1S68,  Art.  139.  The  same  provision  was 
made  in  the  school  law  of  1853  '  and  again  in  1855.^  It  is  also 
contained  in  the  Revised  Statutes  of  1876.'  The  liability  of  the 
State  to  repay  the  deposit  is  noticed  by  the  State  Com- 
mittee of  Finance,  in  1844,  with  the  remark  that  it  will  "  never  in 
all  human  probability  be  repaid  or  demanded."  "  As  the  fund  was 
appropriated  in  1839,  these  later  enactments  in  favor  of  education 
can  hardly  be  said  to  be  in  reality  appropriations  of  the  surplus. 
The  money  is  all  raised  by  taxation,  and  is  called  interest  on  the 
surplus  merely  as  a  formality. 

'  Acts,  1837-8,  26.  •*  Acts  of  1855,  429. 

^  Am.  Statist.  Ann.,  1854,  249.  '  P-  342. 

'  Eaton,  20.  ^  66  Niks,  44- 


CHAPTER  VIII. 

THE    SURPLUS   IN    THE    STATES. 

Maine  Received  $955,838.25. 

The  Legislature  accepted  the  surplus  and  pledged  the  faith  of 
the  State  for  its  repayment  January  26,  1837.' 

On  the  8th  of  March  following,  an  "  Act  providing  for  the  dis- 
tribution and  repayment  of  the  public  money  deposited  by  the 
United  States  "  was  passed.  It  directed  that  the  money  be  de- 
posited with  the  cities,  towns,  and  plantations,  to  be  refunded  in 
sixty  days  after  notice,  the  shares  to  be  apportioned  according  to 
a  new  census.  If  the  towns  did  not  wish  to  draw  the  principal 
they  might  draw  the  interest  instead.  If  any  towns  refused  their 
shares,  the  interest  thereof  was  to  be  subject  to  legislation.  The 
treasurer  could  loan  the  shares  of  such  towns  as  did  not  give 
notice  of  their  acceptance  by  May  ist.  The  first  instalment  was 
to  be  distributed  on  the  basis  of  the  distribution  of  the  school 
fund,  and  the  second  so  that  the  aggregate  of  both  should  be 
proportional  to  the  population  by  the  new  census.  It  was  further 
enacted  :  "  Any  city,  town,  or  organized  plantation  is  hereby 
authorized  to  appropriate  its  portion  of  the  surplus  revenue  or 
any  part  thereof  for  the  same  purposes  that  [for  which]  they  have 
a  right  to  [appropriate]  any  money  in  the  treasury  from  taxation  ; 
also  to  loan  the  same  in  such  manner  as  they  deem  expedient  on 
receiving  safe  and  ample  security  therefor."  ^ 

Doubtless  most  of  the  money  was  distributed  according  to  this 
provision,  but  at  this  time  the  boundary  between  Maine  and  New 
Brunswick  was  doubtful,  and  when  an  agent  was  sent  into  the 
northeastern  extremity  of  the  State  to  take  the  census,  he  was 

'  Acts,  1837,  389.  ^  Laws  of  1837,  403-7. 

70 


SURPLUS  HE  VENUE.  7 1 

arrested  by  the  New  Brunswick  authorities.  On  this  account  the 
estimated  share  of  this  district,  $6,000,  was  kept  back  by  the  State 
Treasurer.  "  It  remained  in  the  State  treasury  until  1S61,  when 
$5,000  of  it  were  set  apart  as  a  separate  school  fund,  the  yearly 
interest  of  which,  at  six  per  cent.,  is  allotted  to  those  towns  for  the 
support  of  schools."  '  Under  the  act  of  March  8,  1837,  the  town 
of  Biddeford  at  a  legal  town  meeting  voted  to  receive  the  money, 
and  that  it  should  "  be  divided  among  the  inhabitants  of  the  town 
according  to  families."  The  officials,  however,  who  received  the 
money  refused  to  apportion  it  among  the  citizens  ;  whereupon 
one  W,  R.  Hooper  brought  suit  against  them  for  his  share.  The 
Supreme  Court  of  Maine  pronounced  such  distribution  illegal,  on 
the  ground  that  by  the  statute,  the  money  was  subject  to  such 
appropriations  only  as  were  legally  met  by  taxation,  and  that  it 
was  illegal  to  raise  money  by  taxation  for  distribution.^ 

March  29th,  An  amendment  to  the  general  act  was  passed  to 
the  effect  that  the  second  instalment  should  be  distributed  on  the 
school  fund  ratio,  and  also  the  third  if  the  census  were  not 
finished  in  time,  and  that  the  remaining  instalment  should  be  so 
apportioned  as  to  bring  the  whole  down  to  the  basis  of  population.' 

Not  quite  a  year  later,  February  28,  1838,  the  towns  were  re- 
leased from  all  obligation  to  return  the  money,  and  were  em- 
powered to  distribute  ii  per  capita  according  to  the  census  of  1837, 
or  to  use  it  like  money  accruing  from  taxation.^ 

Mr.  Eaton  says  that  partial  returns  for  the  years  1837  to 
1839  show  that  $659,598  were  expended  for  public  schools.^ 
This  seems  too  big  an  estimate,  though  no  contemporary  evidence 
has  been  found  that  can  be  arrayed  against  it.  Mr.  Blaine  has 
said  that  :  "  In  Maine  they  made  an  absolute  per  capita  distribu- 
tion of  it  among  the  entire  population — a  trifling  sum  to  each."  * 
The  present  State  Treasurer  writes  :  "  As  a  rule  the  surplus  reve- 

'  Eaton,  21. 

^  2  Shepley  in  14  Maine,  375-S2.  ' 

'  Laws  1837,  441. 

^  Laws,  1838,  460. 

°  Eaton,  20. 

"Letter  to  the  Philadelphia  Press,  Nov.  29,  1883. 


72  SURPLUS  REVENUE. 

nue  was  distributed  per  capita.  There  may  have  been  some  ex- 
ceptions, but  we  have  no  information  on  that  point  in  this  office." 
It  would  seem  unlikely  that,  if  so  large  an  amount  as  Mr.  Eaton 
mentions  had  been  devoted  to  education,  the  fact  would  have 
escaped  the  notice  of  both  Mr.  Blaine  and  the  Treasury  Depart- 
ment. 

Maryland  Received  $955,838.25. 

In  his  message,  Dec.  28,  1836,  Gov.  Veazy  advised  the  Legis- 
lature to  invest  the  money  in  some  permanent  and  profitable  stock, 
and  to  apply  the  interest  to  the  general  purposes  of  the  State  till 
the  treasury  was  relieved,  and  afterwards  to  education.  Though 
it  was  not  likely  to  be  recalled,  yet  the  State  should  be  in  readi- 
ness to  return  it,  and  so  had  better  appropriate  the  interest 
only.' 

The  fund,  after  the  acceptance  and  before  the  final  disposal, 
was  "  applied  to  discounting  real  paper  at  short  dates."  ^  On  the 
i8th  of  March,  1837,  $274,451  was  appropriated  to  pay  the  interest 
on  the  public  debt  already  created.  The  rest  (1681,387.25)  was 
to  be  deposited  in  some  incorporated  bank  or  banks  in  Baltimore, 
which  should  pay  at  least  5  per  cent,  thereon  ;  the  interest  was 
then  to  be  devoted  to  the  support  of  common-school  education, 
being  divided  between  the  counties  and  Baltimore  like  the  existing 

fund.' 

The  Union  and  Franklin  banks  *  were  chosen,  and  the  fund  re- 
ferred to  the  next  Assembly  for  further  disposition.^ 

By  the  act  of  March  17,  1838,  $1,000  of  the  income,  which  was 
$34,069.36,  was  to  be  appropriated  annually  for  the  education  of 
the  indigent  blind  of  the  State. "^ 

A  few  days  later  an  act  was  passed  providing  that  the  residue 
of  the  income  should  be  distributed  yearly,  "  one  half  equally 

'  51  Niles,  292. 

"^  51  Niles,  273. 

""  Acts,  1836-7,  ch.  220. 

*  Later  the  Bank  of  Baltimore  was  added  to  the  list.— 57  Niles,  291. 

^  52  Niles,  82. 

^  Acts,  1837-8,  ch.  173. 


SURPLUS  REVENUE.  73 

among  the  several  (21)  counties  and  the  city  of  Baltimore,  and  the 
other  half  among  the  same,  according  to  population."  ' 

The  State,  since  this  time  has  annually  appropriated  $34,069.36, 
nominally  interest  on  the  surplus,  but  really  raised  by  taxation, 
for  the  support  of  schools.  In  1852  it  was  stated  :  "  There  is  no 
common-school  system  in  this  State.  In  the  city  of  Baltimore 
there  is  a  regular,  organized  scheme  of  public  instruction  ;  but  the 
country  districts  have  merely  local  primary  schools,  under  the 
direction  of  the  several  county  commissioners,  supported  by  a 
county  levy  in  addition  to  an  amount  afforded  by  a  proportion  of 
the  [school]  fund."  ^ 

It  was  a  case  where  outside  aid  was  not  sufficiently  supplemented 
by  local  taxation.  The  principal  of  the  surplus  was  wasted  in  ex- 
travagant internal  improvements.^ 

Gov.  Grason  said  in  1840  that  "the  remainder  of  the  surplus 
might  be  considered  as  so  much  added  to  this  State's  means  of 
complying  with  its  other  engagements."  The  whole  expenditure, 
including  the  interest  on  the  public  debt,  greatly  exceeded  the 
annual  receipts  ;  and  the  deficiency  in  the  revenue  was  supplied 
from  the  special  deposits,  which,  if  applied  to  that  purpose  alone, 
would  be  exhausted  in  two  or  three  years.* 

One  year  later  he  announced  that  only  $149,000  of  the  surplus 
remained  on  deposit,  while  there  was  a  deficiency  of  more  than 
$620,000  in  the  treasury.  After  using  the  rest  of  the  surplus,  a  de- 
ficiency would  remain  of  about  $470,000  to  be  provided  for.  After 
that  year  they  must  face   an    annual   deficiency   of  upwards  of 

'  Acts,  1S37-8,  ch.  285  ;  Al.  Aim.,  1840,  237. 

"^  Am.  Statist.  Ann.,  1854,  267. 

'  "  Unfortunately  for  this  ill-fated  State  every  department  (from  1832  on)  was 
under  the  control  of  those  who  held  opinions  which  had  been  condemned  by  the 
judgment  of  the  whole  country.  They  refused  to  abandon  altogether  an  ex- 
travagant system  of  roads  and  canals  that  cannot  be  consummated  in  a  country 
like  the  United  States  where  the  population  is  scattered  and  sparse.  We  be- 
hold [then]  the  little  State  of  Maryland  having  10,000  square  miles  of  territory 
and  318,194  white  inhabitants  staggering  along  with  undertakings  that  would 
task  the  financial  resources  of  the  whole  kingdom  of  Great  Britain." — Gov. 
Thomas,  Mess.,  Dec,  1842  ;  63  Niles,  314. 

*  Message,  Jan.,  1840  ;  57  Niles,  291  ;    2  Hazard,  177. 


/4  SURPLUS  REVENUE:. 

$600,000.'  As  might  be  expected  Maryland  suspended  payment 
of  the  interest  on  her  public  debt  January  i,  1842. 

Four  years  later,  December  i,  1845,  the  arrearages  of  interest 
had  amounted  to  $1,376,871.24.^ 

The  surplus  in  Maryland  was  a  temporary  benefit  to  the  State's 
creditors  but  a  permanent  injury  to  the  State.  It  stimulated  ex- 
travagance, increased  the  State  debt,^  and  had  a  demoralizing  effect 
upon  the  people  generally.''  It  was  several  years  before  the  State 
got  out  of  the  straits  in   which   bad   financial  management  had 

placed  her. 

Massachusetts  Received  $1,338,173.58. 

The  Whig  papers  of  Boston  recommended  the  Legislature  to 
loan  the  deposits  to  the  banks. ^ 

The  deposit  was  accepted  the  19th  of  January,'  and  disposed 
of  the  21st  of  March,  1837,  as  follows  :  The  first  two  instalments 
were  to  be  deposited  with  the  towns  in  proportion  to  their  popula- 
tion by  the  last  census,  the  last  two  according  to  the  population  by 
a  new  census  to  be  taken  in  May,  1837. 

The  towns  were  bound  to  refund  the  deposit  when  the  United 
States  Treasury  called  it  in,  but,  meanwhile,  they  were  to  apply  the 
money  or  the  interest  on  the  same  to  those  public  objects  for 
which  it  is  lawful  to  raise  money,  and  for  no  other  purpose.  If 
any  town  did  not  pay  back  the  money  within  thirty  days  after  a 
call,  an  execution  could  be  served  against  the  goods  of  the  in- 
habitants therefor.  $2,500  was  to  be  reserved  and  loaned  by  the 
treasurer  of  the  commonwealth,  the  income  of  which  was  to  be 

^  59  Niles,  291. 

^  I  Bankers'  Mag.,  747. 

^  The  debt  in  1842  was  at  least  $10,000,000  and  by  some  estimated  at  $15,- 
000,000. — 63  Niles,  313 

*  "  Nothing  has  influenced  more  fatally  the  evil  councils  by  which  so  many  of 
the  States  have  become  involved,  than  the  delusive  expectations,  rekindled  con- 
stantly as  fast  as  they  are  quenched,  of  pecuniary  largesses  from  the  National 
Treasury  for  State  purposes." — Gov.  Thomas  "hi  Md.,  Dec,  1842;  63  Niles, 
313.    See  also  near  the  end  of  chap.  xii.  for  a  more  extended  extract, 

^  Boston  Advocate  in  Blair's  Globe,  Dec.  3,  1836. 

"  I  Supplements  to  the  Rev,  Statutes,    15. 


SUHPLl^S  REVENUE,  75 

and  is  paid  as  follows  :  March  ist,  to  the  treasurer  of  Marshpee 
the  income  of  ^i,ooo  ;  to  the  guardian  of  the  Chappequiddick 
and  Christian  Town  Indians  the  income  of  $1,200,  one  half  for 
the  benefit  of  the  said  Chappequiddick  and  Christian  Town  In- 
dians, the  other  half  for  the  benefit  of  the  Indians  of  Gay  Head  ; 
and  to  the  treasurer  of  the  Herring  Pond  Indians  the  income  of 
$300,  all  the  said  income  to  be  for  the  purposes  of  common-school 
education  in  these  places,  and  these  Indians  to  have  no  other  ap- 
propriation from  this  money.' 

An  amendment  was  soon  passed  providing  that  if  any  town  re- 
fused or  neglected  for  six  months  to  accept  the  money,  it  was  to 
stay  in  the  treasury  for  future  disposition  by  the  Legislature." 
This  bill  was  pronounced  by  some  a  compromise  and  a  bid  for 
favor.' 

The  towns  made  use  of  the  money  in  various  ways,  the  ma- 
jority applying  it  for  town  expenses,  ordinary  and  extraordinary, 
In  1841,  36  towns  devoted  $6,625.95  to  education,  and  in  1846. 
44  towns  applied  $8,392.99  to  that  purpose.''  The  appropriation 
in  1840 — was  $9,529.48.^  From  these  fluctuating  figures  it  will  be 
seen  that  sometimes  a  town  devoted  the  money  to  education  and 
sometimes  did  not. 

Michigan  Received  $286,751.49, 

Secretary  Woodbury,  in  a  communication  to  the  House  of  Rep- 
resentatives, Jan.  3,  1837,  stated  that  "  the  payment  of  the  share 
assigned  to  Michigan  would  be  postponed  till  some  expression  of 
opinion  should  be  given  by  Congress."  °     Michigan  was  admitted 

'  I  Suppl.  Revised  Stat.,  20. 

'  Act  of  April  I,  1S37,  ibid.,  23. 

'  The  House  did  not  agree  on  the  bill  they  sent  to  the  Senate  because  it  was 
the  best,  but  because  it  was  the  only  one  they  could  agree  on.  It  seemed  to  have 
filled  the  minds  of  the  members  that  the  only  way  they  could  gain  popular  favor 
was  by  voting  to  distribute  it.  The  act  exposed  the  towns  to  endless  strife  and 
contentions. — Boston  Courier  (the  exact  date  was  lost). 

*  See  Table  in  Appendix  III. 

'  Report  of  Supt.  Mann.  5  Hazard,  320.    Also  in  Am.  Aim.,  1843,  208. 

"  51  Niles,  297. 


']6  SURPLUS  REVENUE. 

into  the  Union  Jan.  26,  1837.  The  people,  however,  did  not  wait 
for  that  formality,  but  straightway,  after  the  passing  of  the  deposit 
bill,  they  accepted  their  share  by  the  act  of  July  22,  1836.*  The 
share  of  the  surplus  falling  to  Michigan,  having  been  duly  paid 
with  the  approval  of  Congress,  was  placed  by  the  act  of  March 
22,  1837,  to  the  credit  of  the  internal  improvement  fund  as  a  loan, 
to  be  returned  to  the  treasurer  of  the  State  whenever  the  loan  for 
internal  improvements  should  be  obtained,  or  whenever  required 
by  the  Legislature. 

Further,  the  board  for  internal  improvements  might  loan  any 
money  not  immediately  needed  to  any  specie-paying  bank  for  not 
less  than  five  per  cent,  interest  payable  semi-annually." 

In  a  little  over  a  year  $80,000  of  the  surplus  was  passed  to  the 
credit  of  the  State,  "  to  be  drawn  out  according  to  law  to  defray 
the  current  expenses  of  the  State."  '  A  year  later  a  second 
$80,000  was  drawn  for  the  same  purpose.''  In  nine  months 
$100,000  more  was  credited  to  the  general  fund.^  The  remaining 
$26,751.49  "continued  to  form  a  part  of  the  internal  improve- 
ment fund,  and  contributed  to  the  works  for  which  that  fund  was 
provided."  ' 

It  is  hard  to  see  how  the  surplus  was  of  any  real  benefit  to 
Michigan.  It  only  relieved  the  inhabitants  momentarily  from  the 
burden  of  their  own  extravagance.  Swept  along  in  the  tide  of 
reckless  speculation  which  then  carried  every  thing  before  it,  the 
people  of  Michigan  had  contracted  a  debt  of  $5,340,000  before 
1838,  when  the  population  was  less  than  200,000.  There  seems 
to  be  good  reason  to  believe  that  the  presence  of  the  surplus 
stimulated  rather  than  checked  their  prodigality,  for  it  was  affirmed 
early  in  1839  that  their  appropriations,  though  reduced,  far  exceeded 
the  means  of  the  State.' 

1  Acts,  1835-6,  61.  ''Acts,  1837,  269  ;  Trotter,  342. 

'Act,  April  6,  183S  ;  Acts  of  1837-8,  244  ;  entered  in  Treasurer's  Report, 
Acts,  1839,  295.  "Acts,  1839,  179. 

^  Act,  Jan.  30,  1840  ;  Acts,  1840,  46  ;  entered  in  Auditor's  Report,  Acts,  1841^ 
250.  °  Deputy  State  Treasurer,  1884. 

^  56  Niles,  160.  The  Detroit  Advertiser  sz\A.  :  "  The  only  practicable  remedy 
which  we  can  perceive  for  the  pecuniary  embarrassments  under  which  the  State 


SURPLUS  REVENUE.  J  J 

That  Michigan's  share  of  the  surplus  was  largely  wasted,  to  say 
nothing  of  its  effects  in  creating  extravagance,  appears  altogether 
probable  from  the  words  of  contemporary  writers."  Like  all  the 
Western  States,  they  planned  a  great  many  works  at  such  immense 
expense  that  all  their  resources  were  used  up  before  any  thing  was 
finished,  and  so  very  much  was  lost.  When  it  is  remembered 
that  with  a  population  of  only  175,169  in  1837,  mostly  farmers 
with  little  capital,  in  a  new  country,  improvements  were  designed 
whose  probable  cost  would  equal  |i5, 000,000,^  some  idea  of  the 
wildness  of  these  undertakings  may  be  obtained. 

When  such  methods  of  financiering  prevailed,  it  would  have 
been  a  wonder  if  the  surplus  fund  had  not  been  wasted  like  the 
most  of  the  five-million  loan. 

Michigan  failed  to  pay  the  interest  due  on  her  debt  for  some 
years  after  the  first  instalment  became  due  July  i,  1843.  In 
Feb.,  1843,  ^^^^  Legislature  "covenanted  with  the  bondholders  to 
fund  the  interest  till  July,  1845,  pledged  the  revenue  from  the 

and  the  people  thereof  are  laboring  is  time  and  retrenchment.  It  will  go  hard  with 
our  spoil-loving  rulers,  but  they  must  come  to  it.  Necessity  is  a  stern  master. 
They  have  exhausted  the  treasury — exhausted  tlieir  credit,  now  they  have  be- 
come economists  from  mere  necessity.     It  is  time  they  should." — Niles,  ibid. 

*  "  This  State  has  a  debt  of  about  five  million  and  a  half  of  dollars,  and  what 
is  peculiarly  unfortunate  the  State  has  lost  more  than  one  third  of  the  proceeds 
of  the  stock  which  has  been  issued,  by  the  infidelity  and  insolvency  of  those 
with  whom  the' loans  were  negotiated  [see  2  Curtis,  122]  ;  and  even  the  amount 
received  has  not  been  expended  in  such  a  manner  as  to  yield  revenue  to  any 
considerable  amount.  The  board  of  internal  improvement  in  a  recent  report 
say  :  '  We  have  expended  or  wasted  three  fourths  of  our  five-million  loan,  and 
what  have  we  to  show  for  it  ?  '  We  have  finished  about  forty,  say  fifty  miles  of 
the  Central,  and  about  thirty-four  of  the  Southern  railroads,  and  there  will  soon 
be  completed  the  portion  of  the  Clinton  and  Kalamazoo  Canal  between  Roches- 
ter and  Frederick,  and  where  are  the  profits  to  remunerate  the  State  for  this 
heavy  outlay?" — A.  C.  Flagg,  Comptroller  of  New  York  :  a  report  on  State 
debts.     Am.  Aim.,  1842,  106. 

■■'Early  in  1842  Gov.  Barry  writes  :  "  The  system  of  internal  improvements 
projected  in  Michigan  some  years  ago,  when  speculation  was  the  mania  of  the 
day,  embraced  about  596  miles  of  railroad,  233  miles  of  canal,  and  the  im- 
provement of  five  rivers.  The  probable  cost  would  not  have  fallen  short  of 
$15,000,000." — 63  Niles,  336. 


78  SURPLUS  REVENUE. 

public  works  to  the  payment  of  the  interest  which  should  accrue 
after  that  time,"  and  voted  a  direct  tax  to  supply  deficiencies  of 
interest.* 

In  1846  the  Central  R.  R.  was  sold  for  $2,000,000,  and  the 
Southern  for  $500,000.'  The  two  cost  $3,343,284.92.'  The  cir- 
cumstances of  Michigan's  partial  repudiation  are  detailed  by 
Curtis. 

Mississippi  Received  $332,355.30. 

The  deposit  was  accepted  May  2,  1837.'  In  1839  the  Legisla- 
ture passed  an  act  loaning  $30,000  from  the  surplus  revenue  to 
the  Railroad  and  Turnpike  Co.  in  the  counties  of  Newton  and 
Lauderdale.  .  Three  bonds  of  $10,000  each  were  executed  there- 
for, payable  to  the  governor,  after  ten,  fifteen,  and  twenty  years 
respectively.  The  money  was  to  be  spent  in  improving  naviga- 
tion in  the  Chickasawy  River  ;  if  all  was  not  used  the  residue  was 
to  be  returned,  and  in  case  the  United  States  called  in  the  surplus 
the  bonds  became  immediately  payable.'  In  reference  to  an  act 
supplemental  to  this,  three  Senators  put  forth  a  protest,  saying  : 
*'  By  this  vote  of  the  Senate,  they  have  in  our  judgment  squan- 
dered the  public  money  upon  a  company  of  individuals  engaged 
chiefly  in  speculation,  whose  personal  interest  will  be  promoted  by 
the  law  in  question  ;  while,  on  the  other  hand,  the  State  will  not  be 
benefited  by  the  appropriation."  ° 

Such  are  the  meagre  notices  about  the  surplus  in  Mississippi 
that  the  writer  has  been  able  to  collect  ;  letters  to  the  State  of- 
ficers brought  no  reply,  and  therefore  he  is  thrown  back  upon 
conjecture,  which  in  this  case  is  not  difficult.  To  judge  from  the 
single  instance  quoted  it  would  seem  probable  that  the  money  was 
loaned.  Notwithstanding  this  probability,  a  consideration  of  the 
state  of  the  finances  in  Mississippi  leads  to  the  belief  that  it  was 


1  2  Curtis,  123. 

'  Am.  Aim.,  1848,  310. 

'  Am.  Aim.,  1847,  294. 

*  Laws,  1824-3S,  590. 

"Act,  Feb.  15,  1839  ;  Acts,  1839,  365  ;  Democratic  Rule,  112. 

'■■  Democratic  Rule,  122  ;  quoted  from  Senate  Journal  of  that  Session,  350. 


SURPLUS  REVENUE.  79 

used  for  the  State  expenses,  or  was  squandered  during  those  times 
of  reckless  financiering.  We  find  it  once  mentioned  among  the 
items  of  the  State  debt,  "$382,335.30  deposited  by  the  General 
Government,  and  which  is  liable  at  any  time  to  be  recalled.' 

Now  Jan.  i,  1838,  there  was  a  surplus  or  balance  of  cash  in  the 
treasury  amounting  to  $279,6 13.3 ij-,  not  including  the  sinking 
fund,  the  seminary  land  fund,  or  the  Jackson  City  lot  notes.  Be- 
sides these  items  and  the  above-mentioned  cash  balance,  the 
State  held  stock  in  the  Planters'  Bank  for  at  least  $2,000,000, 
which  before  that  time  yielded  ten  per  cent,  per  annum. ^  Though 
nothing  is  said  in  the  connection  to  lead  us  to  suppose  that  this 
cash  balance  was  part  or  contained  part  of  the  surplus,  yet  it  is 
not  at  all  unlikely. 

In  1840,  however,  the  treasury  was  empty — so  empty  that  there 
was  nothing  to  pay  the  Legislature  with,  whereupon  that  body  dis- 
banded. ' 

In  Jan.,  1842,  the  treasury  had  receipts  of  the  Attorney-General 
for   claims   on    the    Brandon    and    other   broken   banks   for   the 

sum  of $233,102 

Also  notes  of  the  insolvent  Miss.  R.  R.  Co.        ,         .  63,030 

$296,132 
There  were  some  other  notes  to  raise  the  total  to  about  $298,000, 
but  these  securities  were  not  worth  five  per  cent,  on  their  face 
value.  In  addition  the  treasury  had  thirty-four  cents  in  specie, 
while  the  "  real  and  pretended  claims  against  the  State  exceeded 
the  sum  of  $8,000,000."  * 

Under  such  circumstances  and  in  the  absence  of  adverse  testi- 
mony it  seems  safe  to  say  that  the  surplus  was  applied  to  State  ex- 
penses, and  at  a  time,  too,  when  the  State  finances  were  too  reck- 
lessly managed  to  permit  of  economy.  It  does  not  appear  unjust, 
then,  when  we  look  at  the  only  notice  we  have  of  any  part  of  the 
surplus  and  the  disposal  thereof,  and  at  the  way  the  State  finances 

'  Democratic  Rule,  106. 

"^  Democratic  Rule,  218-220  ;  from  Senate  Journal,  1843,  25. 

'  Democratic  Rule,  166. 

*  Democratic  Rule,  218-220. 


80  SURPLUS  REVENUE. 

were  carried  on  at  that  time,  to  say  baldly  that  in  Mississippi  the 
surplus  revenue  was  utterly  wasted. 

Missouri  Received  $382,335.30. 

By  the  act  of  Feb.  6,  1837,  the  Legislature  set  apart  all 
money  which  might  be  received  under  the  act  of  June  23,  1836, 
for  investment  by  the  governor  in  the  stock  of  any  bank  which 
the  State  might  incorporate  ;  and  all  the  interests  and  profits  that 
should  accrue  thereon  were  to  be  applied  to  the  use  and  support  of 
common  schools.  The  fund  was  to  be  styled  the  common-school 
fund.  The  interest  was  to  be  added  to  the  principal  till  the  fund 
amounted  to  $500,000  or  more,  after  which  time  the  income  was  to 
be  used  for  the  payment  of  "  teachers  in  common  schools,"  as  the 
General  Assembly  might  direct  by  a  system  of  common  schools. 
If  the  surplus  should  ever  be  recalled  after  it  was  invested  in  any 
bank  stock  the  State  should  issue  bonds  to  such  a  bank.  These 
bonds  were  not  to  pay  over  five  per  cent.,  and  in  other  respects 
were  to  be  like  previous  bonds.'  The  bank  chosen  was  the  Bank 
of  St.  Louis,  chartered  Feb.  2d,  with  a  capital  of  $5,000,000.* 
This  system  of  common  schools  was  established  by  the  act  of  Feb. 
9,  1839." 

Among  the  funds  we  find  enumerated  :  "All  moneys  heretofore 
deposited  or  which  shall  hereafter  be  deposited  with  this  State  ac- 
cording to  the  act  of  June  23,  1836."  '  As  in  the  first  act  the  fund 
must  accumulate  till  it  reaches  $500,000.  There  were  many  other 
regulations,  as  can  be  seen  -from  the  length  of  the  act.  Among 
them  may  be  mentioned  the  restriction  limiting  the  yearly  ex- 
penditure to  the  income  of  the  previous  year,  and  further,  forbid- 
ding it  to  exceed  sixty  cents  for  each  white  child  between  six  and 
eighteen  years  old  residing  where  there  was  a  school  organization 
entitled  to  a  share  in  the  distribution.^ 

'  Acts  of  1836-7,  137. 

"^  Acts  of  1836-7,  13. 

^  Acts,  1838-9,  112-149. 

"  Repeated  in  Acts,  1853,  147  ;  also  in  2  Rev.  Stat.,  1855,  1414. 

*  Acts,  1838-9,  115. 


SURPLUS  REVENUE.  8 1 

The  portion  left  over  in  1843  was  borrowed  for  a  year  by  the 
State  to  be  repaid,  apparently  with  interest  at  six  per  cent.,  Feb.  i, 

1844.' 

In  the  Constitution  of  1865,  Art.  ix..  Sect.  v.  :  "All  moneys, 
stocks,  bonds,  lands,  and  other  property  now  belonging  to  any 
fund  for  purposes  of  education  "  were  constitutionally  confirmed 
as  parts  of  the  school  fund.  Section  vi.  says  :  "  No  part  of  the 
school  fund  shall  ever  be  invested  in  the  stock,  or  bonds,  or  other 
obligations  of  any  State,  or  of  any  county,  city,  town,  or  corpora- 
tion." All  such  stocks  then  held  were  to  be  sold  and  the  proceeds 
invested  in  United  States  bonds.^ 

The  bank  which  we  have  mentioned  was  under  the  patronage 
of  the  State,  which  subscribed  to  three  tenths  of  its  stock  of 
$5,000,000.  If  we  are  not  mistaken,  it  was  later  styled  the  Bank 
of  the  State  of  Missouri.  While  the  surplus  was  invested  in  this 
stock,  the  income  was  variable,  but  averaged  about  5-^  per  cent. 
annually  for  the  first  eleven  years.  The  fund  is  now  invested  in 
six  per  cent.  State  bonds." 

Missouri,  then,  is  one  of  the  half  dozen  states  which  have  saved 
the  deposit  to  the  present  day. 

'  Acts,  1842-3,  12. 

"General  Statutes,  1865,  40-1  ;    also  in  2  Rev.  Stat.,  1879,  1397. 
N.  B. — In  Myers'  Supp.  to  Wagner,  p.  424,  the  bonds  of  the  State  of  Missouri 
are  made  exceptions  to  this  rule. 
'  Eaton,  22. 


CHAPTER  IX. 

THE    SURPLUS    IN    THE    STATES. 

New  Hampshire  Received  $669,086.79. 

Governor  Isaac  Hill,  in  his  message,  December,  1836,  recom- 
mended that  "  the  money  he  loaned  on  undoubted  security,"  and 
that  the  interest,  which  he  contended  was  all  that  fairly  belonged 
to  the  State,  be  exclusively  applied  towards  the  discharge  of  the 
ordinary  expenses  of  government.'  In  another  place  the  long 
legislative  struggle  over  the  deposit  has  been  noticed.  In  gen- 
eral, the  distribution  bill  seems  to  have  been  unpopular.'  The 
surplus  was  accepted,  however,  January  11,  1837,  and  on  the 
13th  a  bill  was  passed  which  provided  that  it  should  be  deposited 
with  the  towns  on  this  compound  ratio  :  one  half  according  to  the 
new  proportion  for  the  assessment  of  public  taxes  to  be  made  at 
that  session,  and  one  half  according  to  the  number  of  ratable 
polls  for  the  year  1836.  The  faith  of  the  towns  was  to  be 
pledged  for  the  return  of  the  money,  which  they  might  loan  but 
not  spend  or  appropriate.^ 

1  Blair's  Globe,  December  3,  1836,  from  the  Albany  Argtis.  The  passage  is 
introduced  thus:  "Governor  Hill,  with  an  eye  to  the  true  interest  of  the 
distribution  bill,  and  with  a  view  to  retain  the  share  of  the  State  within  the 
reach  of  the  authorities  responsible  for  its  repayment,  recommends,"  etc. 

'^  "  A  minority  report  was  made  [in  the  Legislature]  in  which  reasons  were 
urged  against  the  acceptance  of  the  money,  and  recommending  the  adoption  of 
a  resolution,  declaring  that  the  distribution  of  the  surplus  is  not  only  unconsti- 
tutional, but  highly  dangerous  to  the  liberties  of  the  people." — Mercantile 
Journal,  in  the  Boston  Courier,  December  15,  1836. 

The  distribution  bill,  according  to  some,  would  seem  to  have  opened  the  way 
for  the  political  promotion  of  Franklin  Pierce.  He  was  elected  Senator  by  108 
votes  out  of  160,  and  the  following  comment  shows  the  connection  of  this  event 
with  the  "  Distribution"  :  "  Mr.  Page,  the  present  incumbent,  seems  to  have 
given  offence  by  voting  for  the  distribution  bill." — The  New  Yorker,  December 
24,  1836.  '  Laws,  Nov.  Sess.,  1836,  231. 

82 


SURPLUS  REVENUE.  83 

It  is  noted  in  Niles  that  the  towns  of  Haverhill  and  Newport 
voted  to  receive  their  portions  in  specie.'  A  year  and  a  half  later 
the  act  was  amended  to  the  effect  that  the  moneys  could  be  loaned 
or  appropriated  for  any  purpose  for  which  the  towns  could  lawfully 
raise  money. '^ 

July  4,  1S39,  an  act  was  passed  authorizing  any  town  to  trans- 
fer or  convey  to  the  New  Hampshire  Asylum  for  the  Insane  its 
share  of  the  surplus  revenue,  on  condition  that  the  institution 
should  be  located  in  such  town.  The  towns  were  not  released 
from  their  liability.'  In  two  years  it  was  made  "  lawful  for  any 
town  in  this  State,  at  a  legal  town  meeting,  to  make  any  disposition 
of  the  public  money  as,  by  a  major  vote,  said  town  should  deter- 
mine." *  According  to  the  Revised  Statutes  adopted  December 
18,  1842,  the  towns  might,  at  a  legal  meeting,  make  such  disposi- 
tion of  the  money  "  as  should  be  deemed  equitable  and  ex- 
pedient." They  were  still  accountable  if  the  United  States  should 
demand  the  money.  "  In  case  of  such  a  requisition  the  treasurer, 
on  a  warrant  from  the  governor  and  his  council,  shall  pay  it  from 
any  money  in  the  treasury  ;  and  if  that  is  not  sufficient,  he  shall 
raise  a  loan,  at  not  more  than  six  per  cent,  interest,  for  that  pur- 
pose." ^  It  seems  probable  that  a  considerable,  if  not  a  large, 
part  of  the  surplus  was  distributed. ° 

>  52  Niles,  48.  "  Act,  July  4,  183S  ;  Acts,  1838,  June  Sess.,  355. 

'Acts,  June  Sess.,  1839,  38.  The  Asylum  was  located  at  Concord. — Rev. 
Stat.,  1842,   55.  "  Act.  July  2d  ;   Acts,  1841,  538. 

'  Rev.  Statutes,  1842,  55  ;    Gen'l  Statutes,  1867,  52. 

^  Prof.  R.  E.  Thompson  says  :  "  New  Hampshire  illustrated  extreme  demo- 
cratic principles  by  distributing  the  money  among  her  citizens,"  but  this  state- 
ment is  rather  too  broad,  as  is  shown  in  the  text. 

The  following  are  of  interest  :  "  Dividing  the  Stirpbis  in  New  Hampshire. 
"  In  Portsmouth,  N.  H.,  the  inhabitants  voted  to  divide  that  portion  of  the  sur- 
plus revenue  which  fell  to  that  town,  per  capita — the  sum  due  to  every  man, 
woman,  and  child  in  the  place  being  between  two  and  three  dollars.  That  vote 
is  now  in  course  of  execution.  An  agent  has  been  appointed  and  has  received 
the  money  for  distribution  ;  but  about  two  hundred  suits  have  been  commenced 
against  him  as  the  trustee  of  individuals  owing  small  sums,  and  he  is  placed  in 
rather  an  embarrassing  situation. 

"  In  Gilford  (the  Exeter  iV^wj-Zd'/^^r  states)  the  surplus  or  a  part  of  it  hav- 


84  SURPLUS  REVENUE, 

About  fifty  towns  seem  to  have  kept  the  money  invested,  if  we 
may  judge  from  the  appropriations  for  schools  fifteen  or  more 
years  ago.' 

Mr.  Eaton  estimates  that  about  $i,8oo  a  year  has  been  derived 
from  the  surplus  for  school  funds,  or  about  five  and  a  half  per 
cent,  of  the  annual  interest  at  six  per  cent." 

"There  still  remains  in  the  State  treasury  the  sum  of  $1,009.44 
with  the  accumulated  interest  of  $1,723.82,  which  was  assigned  to 
sundry  unincorporated  places  and  where  there  was  no  one  to  re- 
ceipt for  it."  The  treasurer's  books  "do  not  even  show  the 
amounts  paid  to  the  several  towns."  ' 

New  Jersey  Received  $764,670.60. 

New  Jersey  accepted  the  deposit  November  4,  1836,"  and  Gov- 
ernor Dickerson  recommended  that  it  be  added  to  the  school 
fund.^  By  the  act  of  March  10,  1837,  the  money  was  appropriated 
among  the  several  counties  according  to  the  ratio  of  the  State  tax 
paid  by  them  ;  chosen  freeholders  were  to  pledge  the  faith  of  the 
county  on  receipt  of  the  trust,  and  were  empowered  to  loan  and 
reloan  the  money  upon  bond  and  mortgage  or  other  good  and 
sufficient  security,  as  should  seem  to  them  safe  and  proper.  Men 
of  their  own  county  were  to  receive  the  preference  among  the 
applicants  for  loans.  The  freeholders,  further,  must  sue  for 
and  recover  the  same  with  interest  in  their  corporate  capacity, 

ing  been  expended,  the  selectmen  decline  to  borrow,  as  instructed  to  do  by  the 
vote  of  the  town,  so  much  money  as  will  make  good  the  deficiency — having 
some  not  very  unreasonable  doubts  of  their  legal  right  to  borrow  money  for  the 
purposes  of  distribution." — 5  Hazard,  186. 

These  little  men  copied  well  the  example  of  the  great  men  at  Washington, 
who  wanted  to  borrow  money  to  distribute  as  the  fourth  instalment. 

'  See  Table  in  Appendix  IV. 

^  In  the  year  1848-9  the  income  from  the  surplus  among  the  school  funds 
was  $2,500  (Am.  Aim.,  1850,  231)  ;  in  1860-1,  $1,512.06  ;  1861-2,  $2,460.51 
(Nat.  Aim.  and  Ann.  Record,  1864,  279). 

^  Letter  from  the  treasurer. 

*  Acts  of  1836-7,  10. 

*  Boston  Courier,  January  19,  1837,  and  Revision  of  New  Jersey,  1131-4. 


SURPLUS  REVENUE.  85 

and  apportion  and  pay  the  interest  to  the  several  townships 
in  the  above  ratio  of  the  State  tax,  for  the  benefit  of  said 
township  or  the  inhabitants  thereof.  The  freeholders  were  to  be 
paid  by  the  day  in  no  higher  proportion  than  for  other  services. 
The  penalty  for  embezzling  was  to  be  a  fine  not  exceeding  $1,000, 
or  imprisonment  not  exceeding  five  years,  or  both.  If  the  board 
of  chosen  freeholders  should  neglect  or  refuse  to  pledge  the  faith 
of  the  counties,  the  money  should  be  loaned  for  the  benefit  of 
the  counties,  at  their  own  risk  ;  the  freeholders  also  were  to 
publish  an  annual  report  in  the  chief  county  paper  of  all  their 
transactions.' 

Two  years  later  Mercer  County  was  formed,  and  received  its 
share  of  the  surplus  from  the  counties  out  of  which  it  came.  The 
interest  of  its  share  was  to  be  paid  to  the  townships  in  proportion 
to  the  county  taxes  they  paid.° 

This  fund  was  henceforth  spoken  of  as  "  State  property  not 
now  productive,  consisting  of  the  surplus  revenue  lent  to  the 
counties  without  interest."  ^ 

It  is  probable  that  more  or  less  of  the  income  was  devoted 
to  the  support  of  schools  from  the  first.  In  the  year  1861  $30,- 
505.76  of  the  school  money  was  obtained  from  interest  on  the 
surplus.* 

Mr.  Eaton  estimates  that  $15,000  a  year  was  added  to  the 
school  income  up  to  1852  from  this  source,  and  from  1852  to  1867 
about  $30,000  a  year.^  In  1867  the  whole  income  of  the  fund  was 
appropriated  to  schools  in  "  an  act  to  establish  a  system  of  public 
instruction."  Art.  ix.  Sect.  77,  reads:  "Be  it  enacted — That 
the  several  townships  of  the  State  are  authorized  and  required  to 
appropriate  the  interest  of  the  surplus  revenue  received  by  them, 
and  from  other  funds  not  raised  by  tax,  such  sums  for  the  support 
of  public  schools  as  they  shall  order  and  direct  at  their  annual 
town  meetings."  ' 

The  income  for  education  from  the  surplus  was  $349,313.18  in 

1  Acts  of  1836-7,  432.  ^  Acts,  1839,  158  ;  Revis.  of  N.  J.,  1131-4- 

'  Am.  hXm.,  passim,  1852-61.  *  Nat.  Aim.  and  Ann.  Record,  1863,  422. 

^  Eaton,  23.  '  Laws,  1867,  378  ;  Revision  of  N.  J.,  1086. 


86  SURPLUS  REVENUE. 

the  eleven  years  1866-77,  or  an  average  of  $31,755.74  a  year,'  In 
1876  it  was  $30,523.54.''  The  smallness  of  this  sum  is  explained 
and  the  condition  of  the  fund  stated  in  the  following  extract  from 
a  letter  from  the  State  Superintendent  of  Schools,  Mr.  E.  A. 
Apgar  :  "  I  think  there  is  not  a  county  in  the  State  where  the 
fund  remains  intact.  It  has  been  used  for  various  purposes,  prin- 
cipally for  the  erection  of  county  buildings  and  in  the  payment  of 
war  bounties.  Sixteen  of  our  twenty-one  counties  continue  to  set 
apart  every  year  out  of  the  county  funds  amounts  equal  to  the 
interest  that  would  be  derived  if  the  fund  continued  to  draw 
interest.  That  which  is  appropriated,  therefore,  as  interest  of  the 
surplus  revenue  fund,  is  really  raised  by  taxation,  and  schools, 
therefore,  cannot  be  said  to  receive  any  benefit  from  the  fund." 

New  York  Received  $4,014,520.71. 

The  deposit  was  accepted  Jan.  10,  1837,  and  was  ordered  to  be 
deposited  in  the  banks  paying  the  highest  interest.^  By  the  act 
of  April  4,  1837,  the  money  was  apportioned  among  the  counties 
according  to  population,  to  be  loaned  out  on  real  estate  ;  loan 
commissioners  to  manage  the  fund  were  to  be  appointed  by  the 
governor  and  confirmed  by  the  Senate  ;  the  lands  on  which 
mortgages  were  taken  must  be  worth  double  the  amount  of  the 
sum  loaned,  exclusive  of  buildings,  and  of  the  value  of  the  rent  in 
perpetuity,  if  any  were  charged  thereon  ;  the  borrower  must  have 
a  title  in  fee,  and  the  land  must  have  been  improved.  The  com- 
missioners must  give  a  full  report  the  first  Tuesday  in  each  Decem- 
ber. The  interest  was  to  be  at  seven  per  cent.  Outside  of  New 
York  City  the  sums  loaned  were  not  to  exceed  $2,000,  or  to  be  less 
than  $200  ;  within  the  city  the  limits  were  respectively  $5,000  and 
$500.  The  commissioners  were  paid  as  follows  :  for  loaning 
$25,000  or  less,  f  of  i  percent.;  on  further  sum  of  $25,000  or 
less,  \  of  I  per  cent.;  for  loans  amounting  to  more  than  $50,000, 
\  oi  \  per  cent,  on  the  whole,  except  in  New  York  City,  where 
upon  sums  exceeding  $50,000  the  fees  were  to  be  ^  of  i  per  cent. 

'  Eaton,  23.  2  Raum,  Hist,  of  N.  J.,  294. 

'  3  Edmonds,  75  ;   3  Fay,  349. 


SURPLUS  REVENUE.  87 

When  the  repayment  should  be  called  for  the  comptroller  was  to 
issue  State  stock  on  the  most  favorable  terms  to  raise  the  money.' 
Under  this  law  the  State,  like  Indiana,  loaned  the  fourth  instal- 
ment in  anticipation  of  its  early  appearance.' 

By  an  act  supplementary  to  this  general  act,  the  comptroller  was 
authorized  to  invest  any  money  of  the  "  United  States  Deposit 
Fund,"  as  it  was  called,  that  might  be  in  the  Treasury,  in  State 
stocks,  loans,  or  bonds  of  the  United  States.^  The  losses  of  the 
principal  were  to  be  charged  on  the  income.  The  power  thus 
given  to  the  comptroller  has  been  a  very  salutary  one  in  the  history 
of  the  fund,  as  will  appear  later,  and  this  direction  about  charging 
losses  to  interest  has  been  the  only  way  by  which  the  fund  has 
preserved  its  original  size.  In  1873  $100,000  of  the  income  was 
transferred  for  this  purpose." 

By  the  act  of  May  2,  1864,  the  commissioners  were  authorized 
to  invest  any  moneys  on  hand  in  county  bonds  issued  to  pay 
bounties  to  volunteer  soldiers.^ 

The  Legislature  in  disposing  of  the  interest  on  the  fund  followed 
closely  the  general  recommendations  of  Gov.  Marcy." 

By  the  act   of  April  17,   1837,  $110,000   was   appropriated  to 

'  3  Edmonds,  78  ff. ;  3  Fay,  350  ff.  The  act  takes  up  twenty  pages  in  Edmonds. 

'  "  The  fourth  instalment  of  the  United  States  surplus  revenue  is  still  with- 
held. The  portion  of  that  instalment  due  this  State  is  $1,338,178.57.  Relying 
upon  prompt  payment  of  that  instalment,  the  State  has  loaned  an  equivalent 
sum  to  her  citizens.  I  cannot  doubt  that  you  will  insist  upon  the  fulfilment  of 
the  pledge  of  the  Federal  Government,  and  will  at  the  same  time  protest  against 
the  withdrawal  of  the  instalments  already  received." — From  the  Message  of 
Gov.  Seward,  Jan.,  1840.  2  Hazard,  49  ;  57  Niles,  323.  There  was  nothing 
half-way  about  Seward's  plans  of  distribution  (see  page  42,  note  2).  On  the 
pledge  or  contract  theory  of  the  deposit  see  page  43.  So  far  from  having 
$10,000,000  surplus  to  give  away,  the  Government  was  $5,000,000  in  debt,  but 
that  made  no  difference  with  the  distributionists. 

'  3  Edmonds,  117.  ■•  3  Fay,  367.  "  6  Edmonds,  303. 

^  Gov.  Marcy  recommended  that  while  the  deposit  remained,  $110,000  an- 
nually be  devoted  to  common-school  education,  that  a  liberal  amount  be  given 
to  academies  in  a  way  to  increase  both  the  literature  fund  and  their  annual  share 
of  money,  and  that  the  remainder  of  the  income  of  the  deposits  be  added  to  the 
capital  of  the  common-school  fund. — Blair's  Globe,  Jan.  10,  1837. 


88  SURPLUS  REVENUE. 

common  schools,  to  be  distributed  like  the  existing  school  moneys  ; 
and  school  districts,  to  receive  their  shares,  must  maintain  a  school 
for  four  months  in  the  year  instead  of  three,  to  be  kept  by  a  duly 
qualified  teacher.  The  first  distribution  was  to  take  place  in 
1839.  $55,000  was  to  be  distributed  in  the  same  way  ;  for  three 
years  it  was  to  be  used  in  providing  libraries  for  districts,  but  after 
that  time  it  might  be  used  for  libraries  or  teachers'  pay  at  the  will 
of  the  district.  $28,000  a  year  was  to  be  added  to  the  literature 
fund  for  academies  under  certain  conditions.  The  residue  of  the 
income  was  to  be  added  to  the  capital  of  the  common-school 
fund.'  Later  a  constitutional  provision  was  made  for  adding 
$25,000  annually  to  the  common-school  fund. 

The  income  of  the  fund  varied  quite  widely  from  $237,304  in 
1844  to  $286,950  in  1854.^  The  reports  of  each  year  were  given 
in  the  old  American  Almanac  of  the  second  year  following  as 
long  as  that  annual  was  published. 

The  appropriations  have  been  changed  from  time  to  time,  and 
were  last  year  as  follows  : 
To  academies,   for  instruction   of    common-school 

teachers $i7)585-99 

Academic  examinations  ......  7)985.17 

Transferred  to  capital  of  common-school  fund        .        25,000.00 
Transferred  to   the  revenue  of  the  same  for  divi- 
dends to  common  schools         ....        75,000.00 

Transferred  to  the  literature  fund  revenue  for  divi- 
dends to  academies  ......        28,000.00 

Transferred  to  the  capital  of  the  fund  for  diminu- 
tion of  loans  under  foreclosure  of  mortgages  .  3,288.79 
Premiums,  interest,  and  commissions  on  securities 

purchased 134,634.77 

Transferred  to  the  revenue  of  the  school  fund,  for 

deficiency 57,581.88 ' 

The  reduction  of  the  amount  appropriated  for  common  schools 

*  3  Edmunds,  96  ;  3  Fay,  351  ff. 

'■'  In  1883  the  income  properly  so-called  was  about  $200,000. 

^  Comptroller's  Report  of  January,  1884. 


SUIfPLUS  REVENUE.  89 

to  ^75,000  was  in  accordance,  it  appears  from  the  Comptroller's 
Report,  with  chap.  179,  JLaws  of  1856.'  The  provision  of  $55,000 
annually  for  district  libraries  was  in  force  in  1874,  but  seems  to 
have  been  discontinued.^ 

Though  the  state  of  the  deposit  fund  is  annually  reported  in 
New  York,  the  reports  appear  rather  too  favorable.  In  some 
ways  the  fund  has  been  an  embarrassment.'  Again  the  fund  looks 
safe  when  it  is  really  in  danger  of  suffering  great  losses.  Mr.  F. 
P.  Olcott,  of  New  York,  Comptroller  of  the  State  in  1877,  has 
kindly  communicated  the  following  :  "  On  assuming  the 
duties  of  Comptroller  in  1877,  I  determined  to  look  into 
the  condition  of  the  fund,  and  to  that  end  I  sent  ex- 
aminers to  ten  or  fifteen  counties  selected  miscellaneously. 
The  details  of  these  examinations  were  never  published  in 
report  form,  but  were  referred  to  in  my  report  to  the  Legisla- 
ture, transmitted  January  2,  1878,  in  the  words  following  :  '  As 
far  as  the  investigation  instituted  has  gone,  it  demonstrates  the 
utter  insecurity  of  the  fund.  In  almost  every  particular  the  law  is 
violated — money  is  loaned  upon  property  not  worth  double  the 
amount  of  the  mortgage,  aside  from  improvements.*     Second  and 

^Comptroller's  Report  of  January,  1883,  67.  If  the  treatment  given  New 
York  seems  meagre  in  comparison  with  that  given  some  smaller  States,  it  is  to 
be  remembered  that  each  comptroller's  report  presents  statements  of  the  surplus 
and  its  use,  so  that  it  is  an  easy  matter  for  anybody  to  inform  himself  on  the 
subject.  "3  Fay,  117. 

'  "  It  is  loaned  out  by  the  State  in  small  sums  on  real-estate  security,  and  is 
cared  for  by  no  less  than  fifty  officers  in  the  various  counties,  who  are  appointed 
by  the  Governor  on  confirmation  of  the  Senate,  each  of  whom  bears  the  high- 
sounding  title  '  Commissioner  for  Loaning  Certain  Moneys  of  the  United  States 
Deposited  with  New  York.'  The  most  frequent  duty  of  these  officers  is  the 
collection  of  a  dollar  fee  on  each  real-estate  search,  as  no  title  is  perfect  without 
a  U.  S.  Loan  Commissioner's  search  certificate  that  the  property  has  not  been 
in  debt  to  this  fund,  whose  records  are  not  with  the  usual  records  of  titles  and 
encumbrances.  In  New  York  the  U.  S.  Fund  has  become  an  annoyance  and 
embarrassment." — An  anonymous  writer  in  the  American  Protectionist  for 
June  9,  1883.     He  says  he  was  once  a  commissioner. 

*  Cases  have  been  known  where  the  loans  were  made  on  timber  lands  whose 
value  was  in  timber.  This  was  then  cut  off  and  the  mortgage  suffered  to  fore- 
close to  the  loss  of  the  State, 


90 


SURPLUS  REVENUE. 


third  mortgages  are  taken.  Searches  are  not  made.  Minutes  are 
not  kept.  The  supervisors  whose  duty  it  is  to  examine  the  fund 
annually  in  the  different  counties  and  report  to  this  department  its 
condition,  in  the  majority  of  cases  fail  to  report.  Forged  and 
fictitious  mortgages  have  been  taken,  and  during  the  past  year  two 
of  the  commissioners — one  in  Jefferson  Co.  and  the  other  in 
Chemung  Co. — have  absconded,  and  have  been  found  to  be  de- 
faulters to  the  fund  in  considerable  sums.  In  one  county  alone 
property  upon  which  the  commissioners  had  loaned  ^49,000  has 
been  advertised  for  sale  the  past  year  on  account  of  non-payment 
of  interest,  of  which  amount  the  State  bid  in  $33,500.  It  is  clear 
to  my  mind  that  the  control  of  this  department  over  the  fund  is 
too  remote  to  be  of  use  in  its  management,  or  to  be  of  satisfaction 
to  the  Comptroller.  Considerably  more  than  $3,000,000  '  of  the 
principal  of  the  fund  is  invested  in  mortgages,  and  the  control  of 
this  large  sum  is  in  the  hands  of  men  more  frequently  chosen  for 
political  considerations  than  from  any  peculiar  fitness  for  the 
duties  imposed  on  them.  In  view  of  the  facts  recited  I  recom- 
mend that  legislation  be  had  abolishing  the  office  of  loan  com- 
missioner, and  providing  that  the  mortgages  in  their  possession, 
with  the  records,  be  transmitted  to  this  department,  and  the  fund 
with  its  responsibilities  be  placed  in  the  hands  of  the  Comp- 
troller.' " 

This  recommendation  was  repeated  in  1879  and  1880.  The 
Comptroller  of  the  State  in  the  Report  of  January,  1884,  urges  very 
strongly  that  as  fast  as  loans  become  due,  the  commissioners 
should  be  compelled  to  forward  both  principal  and  interest  to  his 
department.  "  For  the  safety  of  the  fund  this  is  now  absolutely 
essential."  "  The  law  requires  loans  to  be  made  on  the  best  of 
security,  at  six  per  cent,  interest.     This  cannot  now  be  done." 

Therefore  much  money  lies  idle  in  the  hands  of  such  commis- 
sioners as  refuse  to  return  it.  The  losses  and  expenses,  he  says, 
have,  for  the  past  thirty  years,  been  over  $29,000  a  year. 

"  The  State  has  to-day,"  he  goes  on,  "  thousands  of  dollars  in- 

*  The  amount  invested  in  mortgages  and  county  bonds  Sept.  30,  1883,  was 
$2,352,832.26  which  is  $220,000  less  than  it  was  the  year  before. 


SURPLUS  REVENUE.  9 1 

vested  in  farms,  the  result  of  foreclosed  loans,  that  will  not  sell  for 
a  third  the  principal  and  interest  due."  * 

These  testimonies  cast  a  shadow  over  the  figures  that  look  so 
well.  In  New  York  we  may  say  that  the  income  of  the  surplus 
has  been  well  used,  but  the  principal  badly  managed. 

North  Carolina  Received  $1,433,727.39. 

The  deposit  was  accepted  Jan.  11,  1837,  and  was  deposited  in 
the  banks  of  the  State  for  safe-keeping,  not  being  subject  to  draft 
save  by  the  special  order  of  the  General  Assembly,  or  unless  the 
safety  of  the  same  should  require  it.* 

Gov.  Dudley  recommended  that  the  principal  be  employed  for  in- 
ternal improvements,  and  that  the  income  be  devoted  to  the  estab- 
lishment of  common  schools,  or  some  other  object;  he  also  declared 
that  the  tariff  ought  to  be  modified  so  as  to  lessen  the  revenue.' 

In  "An  Act  to  Aid  Internal  Improvements,"  which  was  passed 
that  year,  are  found  enumerated  among  the  resources  for  that  pur- 
pose :  "  Besides  the  funds  heretofore  set  apart  for  internal  im- 
provements, all  the  surplus  revenue,  after  deducting  :  the  sum  of 
$300,000,  which  is  to  be  devoted  to  the  redemption  of  the  public 
debt  of  this  State  ;  the  sum  of  $300,000,  which  is  to  be  paid  for 
stock  subscribed  in  the  Bank  of  Cape  Fear  ;  *  and  that  portion  of 
the  said  surplus  which  is  to  be  added  to  the  literary  fund,  and  to 
be  applied  to  draining  the  swamp  lands."  ^ 

All  that  we  need  to  clear  up  this  is  the  amount  appropriated  for 
draining  the  swamp  lands,  which  was  $200,000.® 

In  accordance  with  this  law  we  find  :  "  Among  the  receipts  of 
the  literary  fund — cash  :  That  part  of  the  surplus  revenue  ap- 
propriated to  this  fund  by  the  last  Legislature  for  the  subscription 

'  Comptroller's  Report,  28. 
'  Laws,   1836-7,  305. 

*  51  Niles,  209. 

*  This  appropriation  was  by  the  act  of  Jan.  23,  1837.     Acts,  1836-7,  6. 
°  I  Revised  Statutes,  1837,  349. 

*  Fayetteville  Observer  vc\.  Am.  Aim.,  1838,  231.  I  mention  this  authority  to 
call  attention  to  the  fact  that  the  other  statements  there  made  do  pot  accord 
with  the  notices  in  the  original  authorities. 


92  SURPLUS  REVENUE. 

for  stock  in  the  Bank  of  Cape  Fear,  and  for  draining  the  Swamp 
Lands  of  this  State,  $500,000."  '     Among  the  receipts  of  the  in- 
ternal  improvement   fund   we   find — "  Cash  :    Being    part  of  the 
surplus  revenue  S533'757-39-"^    Of  the  $400,000  remaining,  $300,- 
000  was  applied  to  the  debt  as  explained  below,  and  $100,000  was 
used  to  pay  the  civil  and  contingent  expenses  of  the  State  by  the 
act  of   Jan.  27,  1837.^      The    $300,000  applied   to  the  debt  was 
made  use  of  as  follows  :  $300,000  worth  of  land   scrip  had  been 
sold  to  the  Secretary  of  the  Treasury  of  the  United  States  for  the 
use  of  the  Cherokee  Indians.      The  governor  was  now  authorized 
to  appoint  a  commissioner  to  buy  this  back,  and   to  do  this  the 
governor  was  authorized  to  draw  on  the  banks  for  a  part  of  the 
surplus,  not  exceeding  $300,000.     The  scrip  was  to  be  re-issued 
in  case  the  United  States  called  for  the  surplus.* 

We  can  now  make  a  tabulated  statement  of  the  items  : 
ist.  To  defray  civil  and  contingent  expenses  .         .       $100,000,00 
2d.  "  For  the    payment  of  stock    in  the  Bank  of 
Cape  Fear,  subscribed  for  by  the  president 
and  directors  of  the  literary  fund  "  ^    .         .         300,000.00 
3d.  "  For  draining  the   swamp  lands  of  the  State 
under  the  directions  of  the  Board  of  Litera- 
ture "   .         .         .         .         .         .         .         .         200,000.00 

4th.  To  redeem  the  Cherokee  land  scrip         .         .         300,000.00 
5th.  Added  to  the  internal  improvement  fund         .         533)757-39 

S^433,757-39 
During    1837   the    Board   of    Internal    Improvements    invested 

^  Treasurer's  Report  for  1830-9,  in  Acts  of  1838-9,  203.  ^  Ibid.,  205. 

^  Acts,  1836-7,  167  ;  Treasurer's  Report,  200. 

*  Act,  Jan.  21,  1837  ;  Acts,  1836-7,  307;  Treasurer's  Report,  200.  In  the 
Treasury  Report  of  Dec,  1840,  a  full  quotation  from  which  was  kindly  sent  me 
by  the  State  Treasurer,  this  transaction  is  referred  to  in  other  words  which  may 
throw  light  upon  it.  The  item  reads  :  "  For  the  redemption  of  the  public  debt 
due  the  United  States,  in  trust  for  the  Cherokee  Indians,  created  for  the  purpose  of 
paying  the  State's  subscription  for  the  stock  in  the  Bank  of  the  State  of  N.  C, 
which  stock  constitutes  a  part  of  the  fund  belonging  to  the  Board  of  Literature, 
$300,000." 

^  These  two  items  are  worded  as  in  the  Treasurer's  Report  of  1840. 


SURPLUS  REVENUE.  93 

$300,000  of  their  part  in  stock  of  the  Wilmington  and  Raleigh 
Railroad,  and  apparently  loaned  the  residue.'  Before  1841,  how- 
ever, the  whole  of  their  share  had  been  put  into  the  railroad.' 
All  of  the  surplus,  except  the  $100,000  devoted  to  State  expenses, 
was  a  part  of  the  educational  fund.' 

In  1840  Governor  Dudley  recommended  a  change  of  manage- 
ment in  the  literary  and  improvement  funds,  by  which  their 
resources  should  be  handed  over  to  the  banks  of  the  State,  and  of 
Cape  Fear,  for  which  the  banks  would  make  a  large  loan  to  the 
Wilmington  and  Raleigh,  and  Raleigh  and  Gaston  Railroad  Com- 
panies. He  said  that  the  most  of  the  counties  had  adopted  the 
common-school  system,  and  that  a  few  had  received  the  State's 
quota  of  money.  The  want  of  schoolmasters  was  the  only  com- 
plaint that  had  reached  him.  This  was  the  universal  complaint 
at  that  time  in  States  beginning  to  form  school  systems.  Further, 
he  pronounced  the  acts  of  1836-7,  creating  the  Boards  of  Internal 
Improvement  and  of  Literature  of  North  Carolina,  very  defective, 
and  in  great  need  of  revision.  Large  sums  of  money  were  at  their 
disposal,  which  they  were  required  to  invest  in  bank  stock,  and  to 
lend  to  individuals  and  corporations.  These  funds  were  daily 
increasing  by  appropriations,  interest  from  loans,  and  bank  divi- 
dends. If  it  were  intended  to  establish  a  loan  office,  necessary 
provisions  should  be  made.  "  It  certainly  never  could  have  been 
intended,"  he  adds,  "  to  convert  the  executive  into  a  loan  office, 
occupying  more  of  the  attention  and  responsibility  of  the  gov- 
ernor than  all  his  other  duties  combined,  and  diverting  him  from 
the  higher  and  more  enlarged  trusts  committed  to  his  care." 
These  funds  ought  not  to  be  loaned,  but  invested.* 

The  Cape  Fear  Bank  investments  were  good,  for  the  bank  paid 
semi-annual  dividends  of    3,    and   later  of   3^^  per   cent,  on    the 

1  The  item  among  the  disbursements  of  1837  of  the  Board  reads:  "Cash 
paid  W.  and  R.  R.  R.,  being  a  subscription  of  stock  under  an  act  of  the  last 
Legislature,  $300,000  ;  loaned  by  the  managers,  $549,450. — Treas.  Rep.  Laws., 
1836-7,  206. 

"  Treas.  Report  of  December,  1840. 

'  Letter  from  the  treasurer. 

"  4  Hazard,  7  ff. 


^4  SURPLUS  REVENUE. 

stock  owned  by  the  literature  fund.'  The  progress  of  the  school 
system  was  slow  at  first,  but  by  1855  it  was  growing  rapidly 
into  efficiency.^  The  experiments  of  North  Carolina  in  internal 
improvements  in  general  were  not  a  success  financially.^ 

The  treasurer  of  the  State  writes :  "  The  investments  for  the 
benefit  of  the  educational  interests  of  the  State  were  considered 
wise  and  judicious,  and  yielded  before  the  war  handsome  divi- 
dends. The  results  of  the  war  rendered  all  of  them  unavailable,* 
except  the  stock  in  the  Wilmington  and  Raleigh  (afterwards 
known  as  the  Wilmington  and  Weldon)  Railroad  Company.  The 
stock  in  this  company  was  sold  in  1869  by  the  State  Board  of 
Education,  composed  of  State  officers  elected  under  the  recon- 
struction acts,  [at  what  was]  supposed  by  them  to  be  a  fair  value 
[valuation],  viz.,  $148,000,  and  invested  in  worthless  special  tax 
bonds,  now  not  considered  as  legal  obligation  of  the  State.  In 
fact,  the  people  have  repudiated  them,  in  view  of  the  questionable 
authority  under  which  they  were  issued.  ...  It  appears 
that  the  original  investments  were  made  solely  to  advance  the 
educational  enterprises  and  interests  of  the  State,  the  loss  of 
which,  for  the  most  part,  is  attributable  to  the  results  of  the  war," 

1  Treas.  Report,  1848  ;  Acts  of  1848-9,  11-13.  Treas.  Report,  1850  ;  Acts 
of  1850-1,  13-15- 

^  Am.  Aim.,  1858,  258. 

^  "  Nearly  all  the  State  debt  was  contracted  in  aid  of  internal  improve- 
ments, directly  or  indirectly.  Some  of  the  efforts  to  give  such  aid  have  resulted 
disastrously,  and  in  others  the  agents  of  the  State  wasted  the  funds." — Hunt's 
Year-Book,  1871,  161. 

*  In  1869  it  was  stated  that  about  one  half  of  the  literary  fund  had  been 
swept  away  by  the  war. — American  Year-Book,  424. 


CHAPTER   X. 

THE    SURPLUS   IN    THE    STATES. 

Ohio  Received  $2,007,260.36. 

The  deposit  was  accepted  December  19,  1836.'  By  the  act  of 
March  28,  1837,  it  was  directed  that  the  surplus  be  divided  among 
the  counties  in  proportion  to  the  male  population  above  twenty- 
one  years  of  age.  It  was  to  be  loaned  to  internal  improvement 
companies  on  good  security,  or  the  commissioners  might  buy  bank 
stock,  or  loan  to  the  county  a  sum  not  exceeding  $10,000  for 
public  buildings.  These  loans  were  to  be  at  six  per  cent.,  pay- 
able semi-annually  in  advance.  Loans  might  also  be  extended  to 
the  State  at  six  per  cent,  per  annum.  If  the  counties  failed  to 
take  all  the  money,  the  auditor  might  loan  the  rest  to  the  canal 
fund  at  six  per  cent,  interest,  and  in  that  case  he  must  pay  over 
to  the  school  authorities  five  per  cent,  yearly.  Further,  all  interest 
accruing  on  these  county  loans  up  to  five  per  cent,  was  to  be  paid 
for  schools  in  the  counties  according  to  the  proportion  of  children 
of  school  age  therein.  Every  January  the  commissioners  must 
publish  full  particulars  of  their  acts  in  some  county  newspaper  of 
general  circulation.  No  loans  were  to  fall  due  later  than  January, 
1850,  at  which  time  the  principal  should  be  subject  to  the  order  of 
the  State  Treasurer  to  pay  the  canal  debt,  unless  some  other  dis- 
position were  made  of  it  by  the  Legislature.  If  the  State  should 
make  this  use  of  the  money,  there  must  be  a  provision  that  five 
per  cent,  interest  on  the  sum  be  distributed  yearly  among  the 
counties  for  the  support  of  common  schools.  The  fund  must  be 
reapportioned  in  1839,  ^^^  ^^  every  subsequent  enumeration. 

Any  amount  of  income  exceeding  the  five  per  cent,  to  be  paid 

'  35  Statutes,  4. 

95 


96  SURPLUS  REVEATUE. 

to  schools  was  to  belong  to  the  county.'  This  provision  was 
altered  March  19,  1838,  so  that  this  excess  should  be  invested 
profitably  for  a  school  fund,  internal  improvements,  or  for  build- 
ing academies.'' 

There  was  a  further  provision  in  the  first  act  that  the  counties 
should  be  held  liable  for  the  five  per  cent,  for  schools,  any  defi- 
ciency to  be  made  up  by  taxation.  This  was  repealed  March  27, 
1841,^  and  immediately  re-enacted,  making  the  deficiency  charge- 
able on  the  grand  levy.'' 

March  13,  1843,  an  act  to  pay  domestic  creditors  of  the  State 
was  passed.  It  empowered  the  commissioners  of  the  canal  fund 
to  borrow  on  the  credit  of  the  State  a  sum  not  exceeding  $1,500,- 
000,  to  pay  the  amounts  due  the  contractors  of  public  works  ; 
bonds  were  to  be  issued  for  this  purpose,  and  to  redeem  these 
bonds  the  surplus  revenue  was  appropriated  with  some  other 
resources. 

The  commissioners  were  to  pay  five  per  cent,  to  the  school 
fund,  and  one  per  cent,  to  the  counties  on  the  amount  paid  in  by 
the  counties.^ 

These  bonds  were  known  as  the  seven-per-cent.  loan,  payable 
January  i,  1852.  Besides  being  pledged  to  redeem  this  debt,  the 
surplus  was  also  pledged  for  the  redemption  of  the  turnpike 
bonds,  payable  in  1846."  It  is  also  mentioned  somewhat  later  as 
applicable  to  the  payment  of  the  debt  in  general.''  Under  this  act 
the  counties  began  to  pay  in  the  surplus,  but  quite  slowly  at  first. 

1  35  Statutes,  97.     Statutes  of  Ohio,  1841,  881-9.     Here  are  quoted  various 
amendments.     This  volume  contains  every  thing  to  date. 
'  36  Statutes,  7g. 
^  39  Statutes,  41  ;  St.  of  O.,  1841,  ibid. 

*  St.  of  O.,  1841,  891. 

*  41  Statutes,  80.  A  full  list  of  the  laws  about  the  surplus  is  given  in  the 
Appendix  to  Swan's  Rev.  Stat.,  Derby's  Ed.,  1854,  p.  1043.  The  last  clause 
mentioned  above  doubtless  means  that  the  counties  were  to  receive  one  per  cent* 
on  the  sums  paid  in  before  they  were  due  {i.  e.,  before  January,  1850),  the  inter- 
est to  stop  at  that  date.  The  text  of  the  law  is  inaccessible  at  the  present,  or  I 
should  have  verified  the  reference. 

"  Aud.  Report,  i  Bankers'  Mag.,  438  (1846). 
^  5  Bankers'  Mag.,  203. 


SURPLUS  REVENUE.  gj 

After  tlie  money  became  due,  which  was  on  January  i,  1850, 
"except  with  certain  balances  not  due  to  the  State  till  1852,"  the 
counties  must  pay  6  per  cent,  on  what  remained  in  their  hands.' 
$839,012.68  had  been  paid  in  up  to  November  15,  1849.  In  the 
year  ending  November  15,  1852,  $279,274.96  was  paid  in.^  By 
comparing  the  reports  of  different  years  it  seems  probable  that  a 
little  more  than  $1,900,000  had  been  paid  by  November  15,  1S55, 
or,  according  to  other  estimates,  about  $1,700,000." 

During  1856,  the  amount  paid  in  was  about  equal  to  the  amount 
of  the  previous  year,  but  immediately  afterwards  the  stream  dries 
up  very  fast,  not  merely  from  the  fact  that  most  had  been  paid  in, 
but  because  the  counties  did  not  pay.  Twenty-five  counties  were 
delinquent  as  late  as  1862,  when  a  tax  was  authorized  to  be 
levied  to  pay  these  dues.  They  could  be  discharged  in  certificates 
of  the  State  funded  debt,  and  the  payment  credited  to  the  sink- 
ing fund.* 

The  money  still  failed  to  come  in,  and  by  the  act  of  April, 
7,  1869,  the  deficiency,  when  collected,  was  to  be  applied  to  any 
fund  in  the  counties  that  the  people  thought  best.^ 

Now  that  the  history  of  the  surplus  as  a  loan  to  the  counties 
has  been  detailed,  it  only  remains  to  pick  up  the  thread  of  its 
relation  to  the  school  fund,  and  then  briefly  to  see  what  was 
done  with  the  money.  Besides  the  provisions  of  the  acts  pre- 
viously quoted  the  school  law  of  1838  appropriated  the  interest  of 
the  surplus  to  schools,"  and  the  act  of  March   24,  185 1,  repeated 

^Am.  Aim.,  1S51,  277.  Under  this  arrangement  it  happened  in  cases  of 
delay  that  the  State  paid  7  per  cent,  on  her  bonds,  while  the  counties  only  paid 
6  for  keeping  the  money  which  would  pay  the  bonds. — Auditor's  Rep.,  Acts 
1849-50,  16. 

*  Am.  Aim.,  1854,  296-7.  The  almanac  during  these  years  gives  the  annual 
returns. 

"  Perhaps  the  latter  is  the  safer  figure,  for  in  that  year  the  interest  on  the  sur- 
plus amounted  to  $17,280.01,  whence  it  would  appear  that  about  $300,000  had 
not  been  paid  in.  The  first  figure  was  calculated  from  not  over-clear  returns  in 
the  American  Almanac. 

*  Act  of  April  23d,  59  Stat.,  59  ;  2  Rev.  Stat.,  18S0,  2103. 
*  66  Statutes,  45.     2  Rev.  Stat.,  1880,  2105. 

'Am.  Aim.,  1S39,  191. 


98  SURPLUS  REVENUE. 

the  clause  and  added  to  the  common-school  fund  "  the  balance  of 
the  Surplus  Revenue  Fund.'  This  last  phrase  it  has  been  impos- 
sible to  interpret  exactly,  for  in  the  school  reports  the  surplus  is 
not  mentioned,  as  the  common  school  fund,  of  which  it  is  a  part, 
is  reported  as  a  unit.  It  may  mean  the  surplus  left  after  paying 
the  turnpike  bonds  and  7  per  cent,  stock  of  1851. 

The  State  borrowed  some  of  the  money  from  the  counties  ;  e.g., 
in  1840,  there  was  such  a  loan  of  $63,332.68  from  three  counties, 
while  the  auditor  managed  the  funds  of  four  more  counties." 

The  use  made  of  the  principal  is  well  illustrated  by  the  follow- 
ing extract  from  an  auditor's  report: 

APPROPRIATION    OF    THE    SURPLUS    REVENUE. 

Appropriated  for  the  redemption  of  the  turn- 
pike bonds, S337»369-85 

Appropriated  for  the  purchase  of  State  bonds, 

7  per  cent,  stock,    ......  208,312.08 

Appropriated  for  the  payment  of  the  faith  and 
credit  bonds,  to  be  refunded  from  the 
sinking  fund,  .         .         ...         .         •  92,742.90 

Total  repaid  by  the  counties,     ....         $839,012.68 
Amount  loaned  to  the  State,       ....  16,806.43 

Balance  due  by  the  counties  Nov.  15,  1849,      .        1,151,441.23 

$2,007,260.34' 

The  internal  improvements  of  Ohio  were  far  more  successful 
than  those  of  other  States,  because  her  undertakings  were  more 
within  her  power.  In  December,  1846,  Governor  Barry  said  the 
internal  improvements  were  fully  completed.  They  were  monu- 
ments of  early  wisdom  and  public  spirit,  and  had  contributed  to 
the  development  of  the  country.*  So  the  application  of  the  sur- 
plus to  paying  part  of  the  improvement  debt  was  a  payment  for 
value  received,  and  not  as  with  so  many  States  merely  sinking  the 

'  Am.  Aim.,  1853,  297.     Repeated  in  succeeding  issues. 

"  2  Hazard,  102.  ^  Laws,  1849-50,  16.  "'  i  Bankers'  Mag.,  433. 


SURPLUS  REVENUE.  99 

money  in  redeeming  a  vast  debt  with  nothing  to  show  for  it.  Yet, 
notwithstanding  the  favorable  words  of  Governor  Barry,  the  con- 
stitution of  1 85 1  prohibited  the  State  from  ever  contracting  debt 
for  internal  improvements  and  from  lending  its  credit/ 

Pennsylvania  Received  $2,867,514.78. 

In  Pennsylvania,  in  1836  as  in  1883,"  there  was  a  party  in  favor 
of  distribution.  On  June  16,  1836,  a  resolution  was  passed  by  the 
Assembly  deprecating  the  investment  of  the  surplus  in  State 
stocks,  and  declaring  that  the  most  safe  and  Federal  disposition 
which  could  be  made  of  the  surplus  revenue  would  be  its  appor- 
tionment among  the  several  States.' 

The  deposit  was  accepted  Dec.  22,  1836.  So  much  of  the 
money  as  should  be  paid  in  draft  or  drafts  on  any  bank  or  banks 
in  Pennsylvania  was  to  remain  where  it  was  then,  or  where  it 
might  be  deposited  Jan.  i,  1837,  until  further  disposition  of  it  by 
law."*  A  temporary  measure  in  reference  to  the  deposit  was  passed 
Feb.  27,  1837.' 

The  parts  in  the  Girard  Bank,  the  Moyamensing  Bank,  and  the 
Merchants'  and  Manufacturers'  Bank  of  Pittsburg  were  to  stay 
there,  paying  five  per  cent,  interest  ;  the  rest  was  to  go  into  the 
Bank  of  Pennsylvania  and  the  Bank  of  Philadelphia,  and  to  pay 
six  per  cent.,  provided    the    banks    accepted    the   charge.     The 

'  Am.  Aim.,  1852,  295. 

*One  of  the  resolutions  adopted  by  the  Republican  State  Convention  of  Penn- 
sylvania, July  II,  1883,  reads  as  follows  :  "  Any  surplus  in  the  public  treasury 
arising  from  a  redundant  revenue  should,  after  paying  the  national  debt  as  fast 
as  its  conditions  permit,  be  distributed  from  time  to  time  to  the  several  States 
upon  the  basis  of  population,  to  relieve  them  from  the  burdens  of  local  taxation 
and  provide  means  for  the  education  of  their  children." — See  "  The  '  Surplus  ' 
Question,"  a  little  pamphlet  which  may  be  obtained  of  The  American,  Phila- 
delphia. 

'  Acts  of  1835-6,  853.  *  Acts  of  1836-7  (the  third  act  of  the  session). 

'Gov.  Ritner,  in  his  message,  recommended  that  the  surplus  falling  to  Penn- 
sylvania should  be  forthwith  and  immediately  applied  to  the  payment  of  so 
much  of  the  State's  debt  as  it  would  cover. — Boston  Traveller  in  Boston 
Recorder,  Dec.  23,  1836.  By  this  means  a  non-interest-bearing  debt  would  in 
so  far  have  been  substituted  for  the  interest-bearing  debt. 


lOO  SURPLUS  REVEMUE. 

interest  of  these  moneys  as  paid  by  the  banks  was  to  be  applied  to 
the  fund  for  common  schools.^ 

A  month  before  the  general  act,  however,  the  treasurer  was 
authorized  by  a  resolution  to  take  a  sum  not  exceeding  ^150,000 
from  the  surplus  revenue  to  make  up  the  deficiency  in  the  semi- 
annual payment  of  interest  on  the  State  debt,  due  Feb.  i,  1837.* 

By  a  special  resolution,  passed  April  7,  1837,  $500,000  of  the 
surplus  was  appropriated  as  an  increase  on  the  annual  grant  of 
$200,000  "  to  be  applied  by  the  several  districts  either  for  buildings, 
repairing  or  purchasing  school-houses,  or  for  education,  as  they  may 
deem  best."  This  additional  appropriation  increased  the  average 
school  season,  which  was  three  months  and  twelve  days  in  1836, 
to  five  months  and  eight  days.^ 

Besides  the  act  and  two  resolutions  that  have  been  described, 
Pennsylvania  passed  no  general  law^  touching  the  surplus  rev- 
enue, but  considered  the  money  outwardly  in  the  light  of  a  non- 
interest-bearing  loan  to  the  State  immediately  available  for  any 
wants.  It  is  generally  said  that  Pennsylvania  used  the  money  for 
schools  and  internal  improvements.^  This  is  true  enough,  but  it 
is  more  accurate  to  say  that  most  of  the  surplus,  especially  that 
part  not  used  for  education,  was  just  put  into  the  State  treasury 
and  drawn  upon  for  all  kinds  of  uses.     This  view  is  derived  from 

1  Acts,  1836-7,  24.  *  Acts,  1836-7,  395. 

^  School  Report,  March,  1840  ;    2  Hazard,  226. 

*  This  becomes  apparent  in  the  course  of  the  narrative,  but  the  following  may 
be  quoted.  "  Pennsylvania,  by  a  prudent  foresight  of  her  executive,  has 
escaped  from  the  disappointment,  which  must  be  severally  felt  by  her  sister 
States,  having  made  no  disposition  of  her  share." — Quoted  with  date,  May  10, 
1837,  in  I  Financial  Register,  151. 

*  "  The  appropriations  for  education  are  very  liberal — $500,000  from  the 
State's  share  of  the  surplus  revenue,  and  $200,000  from  the  bonus  given  for  the 
charter  of  the  U.  S.  Bank.  The  residue  of  the  surplus  revenue  is  applied  to 
the  continuance  of  internal  improvement,  and  the  payment  of  the  State  debt." 
— Nezv  Yorker,  April  15,  1837.  The  American,  of  Philadelphia,  Dec.  22, 
1883,  contained  a  short  notice  of  the  surplus  in  Pennsylvania,  and  the  Fhila- 
delphia  Press  of  Dec.  20,  or  21,  1883,  contains  a  more  extended  account  taken 
from  sources  independent  of  those  used  in  the  text.  The  conclusions  are  that 
"  it  was  used  for  two  great  objects — public  improvements  and  public  schools." 


SURFLUS  REVENUE.  lOI 

the  treasurer's  report  for  1837.  In  it  (p.  7)  the  surplus  revenue, 
^2,867,514.78,  is  included  among  the  receipts  for  1837,  as  well  as 
in  the  statement  of  debt  (p.  5).  Then  it  is  said  that  "  after 
deducting  several  drafts  for  the  use  of  the  State  treasury,  drawn 
during  the  fiscal  year,"  the  balance  on  deposit  in  these  three  banks 
was  12,220,135.74  (p.  9);  this  now  is  exactly  the  treasury  balance, 
for  the  amount  paid  in  for  the  year  ending  Oct.  31,  1837,  including 
balance  on  hand  the  31st  Oct.,  1836,  was  .  $6,394,076,00 
The  payments  for  the  same  period  were  .     4,173,940.26 

Leaving  a  balance  of $2,22o,i35.74(p.8). 

For  some  years  previous  to  this  time  the  revenue  had  not  met 
the  ordinary  and  extraordinary  expenditures  ;  from  1 830-1 835 
large  sums  were  received  from  premiums  on  loans  for  internal  im- 
provements and  bonuses  on  bank  charters,  and  by  these  the  in- 
terest on  the  public  debt  and  the  large  local  appropriations  were 
met  annually.  "  From  1835  till  the  present  time  (says  the  report, 
p.  12)  the  deficiency  has  been  met  by  premiums  on  bank  charters, 
and  the  surplus  revenue  received  from  the  United  States." 
These  extracts  show  clearly  how  the  surplus  was  regarded  and 
used. 

In  reference  to  the  use  of  the  interest  of  the  surplus  while  on 
deposit,  F.  H.  Burrowes,  Superintendent  of  Schools  reported  as 
follows  :  "  By  the  fourth  section  of  the  act  of  the  27th  of  Febru- 
ary, 1857,  the  interest  of  the  surplus  revenue  received  by  this 
State,  is  '  ordered  to  be  applied  to  the  fund  for  the  support  of 
common  schools  within  this  commonwealth.'  The  sum  already 
received  into  the  treasury  amounts  to  ^100,000  and  will  be  con- 
siderably increased  before  the  principal  is  expended  for  internal 
improvements  or  other  purposes.  This  money  has  not  been  em- 
braced in  the  estimates  of  the  State  Treasurer,  Governor,  or  any 
other  officer,  and  has  not,  therefore,  been  calculated  on  for  any 
other  public  use."  Doubts  had  been  entertained  by  the  treasurer, 
and  auditor-general  whether  the  Legislature  did  not  mean  to  have 
the  interest  added  to  the  annual  State  appropriation  ;  but  the 
superintendent  thought  that  the  use  of  the  word  fimd  determined 


I02  SURPLUS  REVENUE. 

that  the  interest  was  to  be  added  to  the  principal  of  the  school 
fund.' 

The  interest  on  the  deposits  for  the  year  ending  October  31, 
1838,  was  $137,668.86.' 

The  school  system  of  Pennsylvania  was  helped  by  the  surplus 
revenue  to  the  extent  probably  of  about  $800,000.  It  could  not 
have  drawn  the  interest  more  than  two  or  three  years,  for  in  1840 
the  treasurer  of  the  State  called  attention  to  an  annual  deficit  of 
$1,000,000  and  upwards,  in  the  ordinary  receipts  and  expenditures 
of  the  State.' 

The  surplus  could  not  stand  such  a  drain  long  and  it  had  disap- 
peared before  1840,  as  these  deficits  were  made  up  by  new  loans. 

The  aid  that  the  cause  of  education  received  from  the  surplus 
was  timely  and  very  helpful.  A  school  system  had  been  organized 
in  1834,  and  what  was  needed  most  were  accommodations  and 
means  to  set  it  in  operation.  The  surplus  supplied  this  need  at  a 
time  when  it  would  have  been  met  but  slowly  by  the  people.  For 
at  that  time  they  were  reluctant  to  endure  taxation,  much  pre- 
ferring running  into  debt,  and  a  little  later  they  were  heavily 
weighted  with  taxes  imposed  on  account  of  the  extravagant  im- 
provement system.  Not  many  years  after  this  their  appropriations 
fell  too  low  to  make  what  was  given  of  much  service.^ 

Pennsylvania's  experience  with  internal  improvements  was  a 
hard  one,  and  brought  the  credit  of  the  State  under  a  cloud  for 
some  years.  The  State  was  not  only  deeply  involved  in  debt  but 
a  great  deal  of  money  was  wasted  and  thrown  away.  This  is 
practically  acknowledged  by  Gov.  Porter,  who  favored  the  system 
in  general.^ 

'  4th  Ann.  Report,  1837,  21-2.  '  55  Niles,  200.  '  2  Hazard,  91. 

*Townsend  Haines,  Supt.  of  Pub.  Instruction  1848-49,  said:  "The  appro- 
priation now  made  by  the  State  is  literally  squandered."  He  mentions  several 
reasons,  among  them  that  the  amount  was  too  small  to  be  effectual,  and  that 
the  people  were  dispirited  by  grievous  taxation  for  the  State  debt. — l6th  Ann. 
Report,  1849,  16. 

'  "  On  the  whole,  though  some  works  have  been  undertaken  of  doubtful 
policy  at  the  time,  though  large  sums  of  money  have  been  expended  on  some 
which  ought  never  to  have  been  commenced,   and  though  the  cost  of  those  of 


SURPLUS  REVENUE.  103 

"  The  total  cost  to  the  State  of  the  Pennsylvania  Canal  and 
branches"  between  1826  to  1843  was  $28,616,375.01.  In  1843 
the  State  owed  a  net  amount  of  $41,581,281.99.  By  1844  the 
people  had  become  alarmed  at  the  prospect  and  declared  them- 
selves in  favor  of  stopping  short  and  selling  the  public  works.  In 
1845  the  main  line  of  the  public  works  was  offered  for  sale 
for  $20,000,000,  but  there  was  nobody  to  buy.  In  1858  the  same 
property  was  sold  to  the  Pennsylvania  Railroad  Company  for 
$7,500,000.'  These  figures  show  the  losses  on  invested  capital. 
The  introduction  of  railroads  lessened  the  value  of  the  greatest 
undertakings  in  the  State,  and  this  unavoidable  circumstance 
must  be  borne  in  mind  in  passing  judgment  on  the  internal  im- 
provement experience. 

Rhode  Island  Received  $382,335.30. 

The  Legislature  of  Rhode  Island  accepted  the  surplus,  Nov.  4, 
1836,  and  the  next  day  passed  a  law  providing  for  its  deposit 
in  banks  that  had  complied  with  the  bank  laws.  These  banks 
must  pay  five  per  cent,  interest  thereon.  The  interest  was 
to  be  apportioned  according  to  the  act  of  1828,  and  devoted  to  the 
support  of  public  schools.^ 

This  appropriation  of  the  interest  was  repeated  in  the  school  law 
of  1839,  while  the  State  was  to  add  thereto  enough  to  make 
$25,000,  which  should  be  the  annual  appropriation  to  schools.' 

The  same  year  the  act  regulating  the  investment  of  the  principal 
was  so  amended  that  whatever  deposits  were  voluntarily  given  up 
by  the  banks  might  be  loaned  to  the  towns  at  five  per  cent,  annual 
interest.  The  sum  loaned  was  not  to  exceed  the  share  that  each 
town  would  receive  on  the  ratio  of  population,  and  the  loan  "  must 
be  used  for  the  purposes  of  education  simply."  ^  By  this  the 
schools  received  a  double  benefit. 

unquestioned  utility  has  been  far  greater  than  it  would  be,  if  the  same  work 
was  to  be  done  under  all  the  advantages  of  our  present  experience,  we  have  yet 
perhaps  as  much  cause  to  be  surprised  at  our  good  as  at  our  ill  fortune." — Mes- 
sage, Jan.,  1840  ;   2   Hazard,  42. 

'  Penn.  Finances,  25-7.  'Stockvvell,  51. 

'Acts  since  1835,  913-4.  *  Acts  since  1837,  1054. 


I04  SURPLUS  REVENUE. 

This  act  was  still  further  amended  by  authorizing  the  com- 
missioners to  invest  such  money  as  was  given  back  by  banks  in 
town  and  city  bonds  having  not  more  than  five  years  to  run 
and  paying  at  least  five  per  cent,  annually.  The  bonds  were 
to  contain  a  condition  that  the  city  must  pay  them  within  thirty 
days,  if  the  United  States  should  call  for  the  money.' 

Jan.  7,  1840,  the  State  borrowed  $29,526.49  of  the  fund  to  pay 
the  remainder  of  the  State  prison  debt.''  In  June,  1842,  an  act 
was  passed  to  draw  out  $50,000  to  pay  for  the  insurrection,  to  be 
refunded  as  soon  as  may  be,  with  interest  at  five  per  cent.'  In 
Oct.  $32,000  more  was  voted. ^ 

The  cost  of  the  "  Dorr  war  was  met  by  the  use  of  a  portion  of 
the  deposit  fund."     The  expense  is  variously  stated.^ 

The  following  is  from  a  report  of  May,  1846  : 
Invested  in  bank  and  other  security        .         .         .     $229,567.84 
In  the  hands  of  the  commissioners  .         .         .  48.18 

Borrowed  by   the   State,    Jan.    7,    1840,   to    pay 

the  balance  of  the  State  prison  debt        .         .         29,526.49 
Borrowed  by  State,  June,  1842,  for  State  purposes  50,000.00 

28,192.72 
"  "  .         25,000.00 

"  "  .         10,000.00 

"  "  .         10,000.00 


<< 

n 

u 

Oct.,  1842, 

« 

(( 

li 

Jan.,  1843, 

(( 

(( 

ii 

June,  1843, 

« 

(( 

ii 

May,  1845, 

Total  borrowed  by  the  State,  $152,719.21.'' 


$382,335-23 


^  Act,  June  26,  1841  ;  Acts  since  Sess.,  Jan.,  1840,  2055. 

2  $35,000  was  voted  (letter  from  Supt.  of  Ed.,  T.  B.  Stockwell). 

=  Actsofjune,  1842,8.      "  Actsof  Oct.,  1842,85;  only  $28,192.72  were  taken. 

°  In  Mr.  E.  R.  Potter's  Report  to  the  General  Assembly,  June  23,  1843,  this 
sum  is  stated  at  $102,949.63  (Am.  Aim.,  1844,  219),  but  in  64  Niles,  296,  is  the 
statement :  "  By  a  report  of  the  Finance  Committee  in  the  middle  of  1843,  it  ap- 
pears that  the  expense  to  the  State  Government  of  suppressing  Dorr's  insurrec- 
tion was  $114,949.  This  was  met  by  the  use  of  a  portion  of  the  '  deposit  fund.'  " 
Full  reports  of  the  Loan  Commissioners  up  to  date  may  be  found  in  the  Acts  of 
June,  1841,  46,  and  again  in  the  May  Acts  of  1843,  p.  8. 

°  Am.  Aim.,  1847,  228. 

7  "  This  is  sometimes  spoken  of  asadebt  "  of  theState.— Am.  Aim.,  1849,  236. 


SURPLUS  REVENUE.  I05 

In  June,  1848,  the  treasurer  was  authorized  by  a  resolution  to 
borrow  $16,000  of  the  Bank  of  North  America,  "to  prevent  using 
up  any  more  of  the  surplus  revenue,  which  by  former  laws  had 
been  specially  devoted  to  schools."  ' 

This  policy  was  not  kept  up,  however,  for  in  Jan.,  1849, 
$41,526.67  was  drawn  "  to  pay  a  note  at  bank."  ^ 

Accordingly,    in    1852,   the    account   of   the   surplus   stood  as 
follows  : 

Loaned  to  cities  and  towns  on  bond  .         .         ,      $70,402.60 

Invested  in  bank  stock      ......      117,638.67 

Used  by  the  State  for  prison  and  Dorr  war       .         .      194,245.88 

Not  funded 48.08 


$382,335.23 
The  State  owed  no  debt  save  what  had  been  borrowed  from 
the  "  deposit  fund."  ' 

"  In  1857,  $32,500  of  the  fund  which  had  been  loaned  to  some 
of  the  towns  was  paid  to  the  treasurer  and  put  by  him  into  the 
general  fund,  thus  making  a  grand  total  of  $226,793.96,  which 
was  taken  out  of  the  deposit  fund  proper. 

"In  1858  Rhode  Island  received  from  the  U.  S.  Government 
$4,276.03  on  account  of  sales  of  the  public  lands.  This  amount 
was  added  by  vote  of  the  General  Assembly  to  the  deposit  fund 
account,*  which  made  the  grand  amount  due  from  the  State 
$231,069.99,  leaving  a  balance  still  invested  in  loans  and  stocks 
as  a  fund.  In  Jan.,  1859,  the  General  Assembly  voted  to  trans- 
fer this  balance  of  $155,541.27  to  the  permament  school  fund. 
In  i860  the  sum  of  $11,191.80  surplus  revenue  of  the  State  was 
directed  to  be  added  to  the  permanent  school  fund  on  account  of 

'  Am.  Aim.,  1849,  240.  The  State  already  owed  $25,000  on  note  to  the 
bank. 

^  $45,000  was  voted — (Mr.  Stockwell).  This  money  was  withdrawn  doubt- 
less to  pay  the  very  note  which  was  given  for  a  loan  to  save  drawing  from  the 
surplus. —  Cf.  note  i. 

'  Am.  Aim.,  1853,  244-5. 

■*  Accordingly  the  deposit  fund  is  stated  as  amounting  to  $386,611.33  in  Am. 
Aim,,  1859,  247,  and  in  all  later  reports. 


I06  SURPLUS  REVENUE. 

the  amount  of  the  deposit  fund  due  that  fund.  No  transfer  of 
funds  has  since  been  made,  so  that  the  State  stands  ostensibly 
as  a  debtor  to  the  school  fund  to  the  amount  of  $219,878.19."  ' 

The  State  has  not  formally  paid  interest  on  this  loan  but  as  the 
State  appropriation  to  schools  is  far  greater  than  this  interest,  it  is 
fair  to  say  that  the  interest  is  included  in  the  appropriation.  If 
the  State  transferred  the  interest  formally,  the  appropriation 
would  doubtless  be  just  so  much  less.  At  the  same  time  the  in- 
lent  of  the  original  laws  was  that  the  money  should  constitute  a 
fund,  and  if  borrowed  should  be  repaid.  The  State  appropriation 
was  $25,000  in  1839  ;  it  was  raised  to  $35,000  in  1851,  to  $50,000 
in  1854,  to  $70,000  in  1868,  to  $90,000  in  1869,  and  has  just  been 
raised  to  $120,000. 

The  regulation  about  loaning  the  surplus  to  towns  has  been  so 
far  changed  as  to  direct  that  the  shares  of  the  towns  should  be 
proportioned  to  the  number  of  children  in  them  under  fifteen 
years  of  age.  The  commissioners  of  the  fund  who  managed  it 
are  the  Governor,  the  Secretary  of  State,  and  the  General 
Treasurer.''  

1  For  these  particulars  I  am  indebted  to  the  kindness  of  Mr.  Thos.  B.  Stock- 
well,  the  State  Supt.  of  Public  Instruction  ;  other  facts  that  he  sent  me 
threw  light  on  some  obscure  points  in  the  account  of  R.  I. 

"  Revised  Statutes,  title  3,  ch.  14.  School  Laws,  v.  As  will  be  seen  in  the 
report  above,  dated  1852,  acts  later  than  that  of  1837,  allowed  the  commis- 
sioners to  invest  the  money  "  in  good  bank  stock." 


CHAPTER  XI. 

the  surplus  in  the  states. 
South  Carolina  Received  $1,051,422. 

The  Legislature  accepted  the  share  of  the  surplus  that  fell  to 
the  State,  December  21,  1836,  and  ordained  that  it  be  deposited  in 
the  Bank  of  South  Carolina,  to  the  credit  of  the  State,  not  as  a 
part  of  the  capital,  but  "  to  be  banked  upon  and  employed  accord- 
ing to  the  usages  of  said  bank."  * 

The  day  before,  by  a  resolution,  the  comptroller-general  had 
been  authorized  to  subscribe  ten  thousand  shares,  or  $1,000,000, 
to  the  Louisville,  Cincinnati,  and  Charleston  Railroad,''  to  be  paid 
out  of  the  surplus  revenue  in  instalments,  as  the  other  stock- 
holders paid.  By  the  charter,  the  $1,000,000  could  be  called  for 
by  the  company  in  instalments  of  $5  per  share,  or  $50,000,  every 
sixty  days.^ 

By  the  act  of  December  20,  1837,  the  fourth  instalment  was  to  be 
paid  to  the  L.,  C,  and  C.  Railroad  Company  to  the  credit  of  instal- 
ments to  become  due  from  the  State.* 

The  ten  thousand  shares  were  subscribed  for  in  1837,  and  one 

'  Acts  of  1836,  45.  Governor  Pierce  M.  Butler,  in  his  message,  after  this 
suggested  that  a  portion  of  the  surplus  be  used  in  erecting  monuments  on  the 
Revolutionary  battle  grounds  (Acts  and  Resolutions,  1837,  p.  5  of  Message). 
Another  proposal  :  a  South  Carolinian,  premising  that  the  surplus  revenue  was 
the  planters'  money  refunded  by  the  Government,  proposed  that  the  State  lend  it 
on  negro  security,  to  save  the  planters  from  having  to  sell  their  negroes  ;  to  make 
the  security  valid  let  the  banks  make  the  same  fund  into  an  insurance  fund  to 
insure  negroes  (51  Niles,  257). 

'  On  this  great  railroad  bank  see  the  Globe,  September  7,  1836  ;  January  2d  ; 
and  January  14,  1837;  2  Financial  Register,  96,  318,  351.  The  notices  in 
Niles  are  indexed  and  are  therefore  omitted  here. 

'  Resolutions,  1836,  129  ;  Report  of  Pres.  of  Bank,  1843,  33 

*  Acts,  1837,  1836. 

107 


I08  SURPLUS  REVENUE, 

instalment  of  $50,000  was  paid  that  year.  In  1838  another  in- 
stahnent  was  paid,  which  left  then  1951,422.09  "on  deposit  in  the 
Bank  of  South  Carolina  subject  to  the  payment  of  the  remaining 
instalments  on  said  shares  when  called  for,  and  in  the  meantime 
to  be  used  as  other  deposits."  '  By  October  i,  1839,  $50,000 
more  had  been  paid.^  The  rest  may  best  be  told  in  the  words  of 
"  The  Report  of  the  Special  Joint  Committee  Appointed  to  Examine 
the  Bank  of  South  Carolina  "  on  the  sinking  fund.  "  In  1840  the 
six-per-cent.  stock,  issued  under  the  act  of  1820,  became  redeem- 
able and,  before  the  ist  of  October  of  that  year,  the  sum  of  $798,- 
795.96  was  redeemed  and  debited  to  this  fund  [/.  e.,  the  sinking 
fund],  which  was  thereby  reduced  to  $57,806.  It  was  then,  by 
the  direction  of  the  comptroller-general,  credited  with  the  sum  of 
$651,422.09,  part  of  the  surplus  revenue  received  from  the  Federal 
Government,  and  deposited  in  the  bank. 

"By  an  act  passed  in  1836,  before  this  money  was  received,  it 
was  directed  that^the  instalments,  as  they  should  become  due  on 
shares  to  be  subscribed  for  by  the  State  to  the  L.,  C,  and  C.  Rail- 
road Company,  should  be  paid  out  of  it,  and  accordingly  the  first 
four  instalments  were  so  paid  ;  but  in  1839  when  it  was  deemed 
expedient  for  the  State  to  make  an  immediate  advance  of  twelve 
instalments,  amounting  to  $600,000,  the  comptroller-general  was 
directed  to  issue  and  deliver  to  the  railroad  company  $600,000  of 
six-per-cent.  stock,  instead  of  requiring  that  sum  to  be  paid  by 
the  bank,  and  by  the  same  act  the  interest  on  the  said  stock  was 
made  payable  out  of  the  sinking  fund  ;  and  the  capital  and  profits 
of  the  bank  and  the  balance  of  the  surplus  revenue  beyond  the 
amount  required  to  pay  the  four  instalments  of  the  subscription 
to  the  railroad  not  advanced,  were  pledged  for  the  payment  of  the 
interest  and  principal  of  said  stock.  The  amount  of  surplus 
revenue  then  on  deposit  was  $85 1,422.09,  of  which  $200,000  would 
be  required  to  pay  the  four  instalments  not  yet  advanced,  leaving 
the  sum  of  $651,422.09,  which  was  carried  to  the  credit  of  the 

'  Report  of  Comptroller  Hayne  ;  Acts  and  Res.,  1838,  70;  and  Table  G, 
Bank  Report,  ibid. 

^  Table  F,  Bank  Report,  20,  in  Comptroller's  Report,  1839. 


SURPLUS  REVENUE.  ^     IO9 

sinking  fund  as  above  mentioned."  '  .  .  .  The  fund  later  "  was 
credited  in  1844  with  a  balance  of  $200,000  surplus  revenue, 
which  was,  by  an  act  passed  in  1843,'^  directed  to  be  transferred 
to  this  fund."'  Besides  the  six-per-cent.  stock  of  1839,  the  five- 
per-cent.  stock  of  1826  was  to  be  extinguished  by  the  sinking 
fund.  The  last  payment  on  the  five-per-cent.  stock  was  made  in 
April,  1847,  and  the  last  on  the  six-per-cent.  stock  in  March, 
1856.' 

While  the  surplus  was  deposited  in  the  State  bank  the  profits  of 
the  bank,  arising  from  the  interest  on  the  same,  amounted  by  Octo- 
ber I,  1843,  to  $356,221.10.' 

In  the  statements  of  the  public  debt  of  South  Carolina  the 
comptroller  mentioned  the  $1,051,422.09  surplus  revenue  annually 
down  to  1859.* 

Though  the  great  Louisville,  Cincinnati,  and  Charlestown  Rail- 
road was  never  built,  the  investment  of  the  State  seems  to  have 
been  a  good  one.  The  new  company  bought  the  South  Carolina 
Railroad  from  Charleston  to  Hamburg,  135!-  miles  long,  which  cost 
$1,750,000,  for  $2,400,000  of  L.,  C,  and  C.  stock.*  Besides  its 
subscription  the  State  guaranteed  for  the  railroad  a  loan  of  two 
million  dollars.'  After  buying  the  South  Carolina  road  the  L.,  C, 
and  C.  Co.  almost  reconstructed  it,  and  laid  out  the  branch  road  to 
Columbia,  128  miles  in  length,  which  was  opened  in  November, 
1840.     The  railroad  bank  had  a  capital  of  $1,500,000,  on  which  in 

*  Reports  and  Resolutions  of  1849,  p.  100.  In  Rep'ts  and  Res.,  1847,  p.  36, 
is  a  report  of  the  president  and  directors  of  the  Bank  of  South  Carolina,  and 
another  is  to  be  found  in  Rep'ts  and  Res.,  1840,  32.  These  reports  agree 
thoroughly  with  the  above,  and  illustrate  the  methods  of  accounting.  The  sur- 
plus was  made  a  special  account. 

"  Dec,  1843. 

°  Letter  from  the  State  Treasurer. 

^  Report  of  Pres.  of  the  Bank,  1843,  p.  43. 

*  Reports /«JJZOT /  also  Am.  Aim.,  1853-61,  Art.,  South  Carolina.  In  1843 
Governor  Hammond  said  :  "  It  is  highly  probable  the  State  will  never  be  called 
on  to  refund  the  surplus  revenue,  though  her  liability  for  it  should  never  be 
forgotten  in  an  estimate  of  her  debt." — Am.  Aim.,  1845,  252, 

°  2  McCulloch,  Geo.,  Diet.,  831. 
'  55  Niles,  40. 


no  SURPLUS  REVENUE^ 

* 

ihe  first  part  of  1839  the  profits  were  at  the  rate  of  eight  per  cent, 
per  annum.'  Then,  after  the  big  scheme  fell  through,  the  different 
branches  in  the  State  were  consolidated  in  1844  and  called  the 
South  Carolina  Railroad  Company.  This  road  did  a  profitable 
business  up  to  the  time  of  the  war,  but  has  since  been  unfortunate.' 

In  November,  1846,  Governor  Aiken  said:  "The  State  has 
hitherto  exhibited  a  wise  policy  in  investing  the  greater  part  of  the 
surplus  revenue  in  the  South  Carolina  Railroad."  He  pronounced 
it  a  valuable  enterprise  which  had  thus  been  encouraged,  was  then 
in  successful  operation,  and  which  promised  to  be  a  source  of 
wealth.^ 

The  State  owned  $641,000  of  stock  in  this  company  as  late  as 
October  1853.' 

From  the  facts  at  hand  it  seems  on  the  whole  that  South  Caro- 
lina  stands   very    well    among   those    States    that    invested    the 

surplus. 

Tennessee  Received  $1,433,757. 58.* 

The  surplus  was  accepted  October  24,  1836,  and  directed  to  be 
deposited  in  the  Union  and  Planters'  banks  of  Tennessee  under  a 
special  contract  by  which  they  were  to  pay  the  State  five  per  cent. 

'  Hayne's  Report,  56  Niles,  325. 

"  The  annual  dividends  between  1844-58  were  5,  5|,  5^,  5.83,  2\,  4,  6,  7,  7, 
8,  8|,  8|,  10,  8,  8^  (Poor's  Manual,  1869-70,  262).  The  expense  of  rebuilding 
and  equipping  the  road  after  the  war  loaded  it  with  a  large  floating  debt.  It 
became  embarrassed,  failed  to  pay  the  interest  on  its  bonds,  and  was  put  into 
the  hands  of  a  receiver,  September,  1878.  It  was  sold  under  foreclosure,  July 
28,  1881,  and  reorganized  as  the  "South  Carolina  R.  R.  Co.,"  November  i, 
1881  (Poor's  Manual,  1883,  453). 

'  I  Bankers'  Mag.,  428. 

*  8  Bankers'  Mag.,  625. 

"  This  was  the  share  that  fell  to  Tennessee,  but  whenever  the  amount  is  men- 
tioned it  is  stated  as  $1,353,209.  The  cause  of  this  discrepancy,  I  have  not 
been  able  to  find  out.  In  the  report  of  the  Secretary  of  the  Treasury  presented 
at  the  meeting  of  the  extra  session  of  Congress  in  1837,  it  was  stated  that  about 
§1,165,575  of  the  transfers  of  the  July  instalment  had  not  been  receipted  for  or 
received  by  the  States.  It  is  barely  possible  that  the  missing  eighty  thousand 
dollars  falling  to  Tennessee  is  to  be  included  in  this  sum,  and  that  it  was  not 
recovered. 


SURPLUS  REVENUE.  Ill 

interest,  payable  semi-annually.  All  the  interest  that  accrued  was 
to  be  received  by  the  treasurer  and  charged  to  him  by  the  comp- 
troller as  part  of  the  State  revenue,  subject  to  the  comptroller's 
warrants  to  meet  all  appropriations  chargeable  on  said  fund  bylaw. 
The  residue  left  was  to  be  loaned  to  the  Union  Bank.'  The 
Farmers'  and  Merchants'  Bank  of  Memphis  would  be  allowed  part 
of  the  surplus  revenue  if  it  agreed  to  the  contract,  which  it  did. 

$707,353  of  the  surplus  was  deposited  with  the  Union  Bank, 
and  "  was  considered  available  for  capital,  as  it  was  not  likely  to  be 
suddenly  recalled.  "  "^  The  rest  was  deposited  in  the  Planters'  and 
Memphis  banks  under  the  same  condition. 

January  19,  1838,  was  passed  "an  act  to  establish  a  State  bank, 
to  raise  a  fund  for  internal  improvements,  and  to  aid  in  the  estab- 
lishment of  a  system  of  education."  The  main  provisions  were 
that  a  State  bank  should  be  set  up  with  a  capital  of  five  million 
dollars,  made  up  of  the  surplus  revenue  and  the  unexpended 
interest  thereon,  the  school  fund,  the  proceeds  of  the  sales  of  the 
Ocoa  (or  Ocoee)  lands,  and  of  such  additional  sums  to  be  borrowed 
as  would  be  required  to  complete  the  five  million  dollars.  The 
fourth  instalment,  if  it  was  received,  was  to  be  paid  on  the  stock 
in  addition  to  the  five  million  dollars. 

The  surplus  was  to  be  paid  over  from  the  deposit  banks  in  two 
yearly  instalments,  beginning  Jan.  i,  1839,  in  specie  or  in  funds 
immediately  convertible  into  specie,  Of  the  dividends  of  this 
bank  $100,000  was  annually  to  be  set  apart  for  common  schools, 
to  be  applied  as  the  General  Assembly  might  direct.  Further, 
$18,000  more  was  annually  to  be  appropriated  for  county  acade- 
mies. The  bank  also  was  to  pay  the  interest  on  the  internal  im- 
provement bonds.  Under  this  head  $650,000  each  was  appropri- 
ated to  the  construction  of  the  Hiwassee  and  the  Charleston  and 
Cincinnati  Railroads,  to  be  paid  by  instalments.^ 

*  Laws  of  Called  Session,  1839,  9.  '  See  Trotter,  258  and  412. 

'  Laws,  1837-8,  153-66  ;  i  Financial  Reg.,  222  ;  Trotter,  261.  The  Am.  Aim., 
1845,  270,  gives  a  history  of  school  legislation  up  to  this  law. 

The  instalments  to  the  L.,  C,  and  C.  Railroad  were  to  be  five  per  cent., 
fifteen  per  cent.,  fifteen  per  cent.,  five  per  cent.,  and  so  on  of  the  total  sub- 
scription.    The  instalments  were  to  fall  due  as  soon  as  the  stockholders  had 


112  SURPLUS  REVENUE, 

Next  in  the  comptroller's  report  of  Oct.,  1839,  the  following 
statement  is  found  :  "  The  first  instalment  of  one  half  the  U.  S. 
revenue  deposits  in  the  Union,  Planters',  and  Memphis  banks  has 
been  promptly  paid  by  the  banks  respectively,  amounting  in  all  to 
^674, 837. 33/  The  whole  amount  of  the  school  fund  in  the  treas- 
ury, and  liable  to  distribution  on  the  first  Monday  of  Jan.  last, 
was  only  1115,551.46,  and  this  sum  has  been  disbursed.  At  the 
close  of  the  first  bank  year  the  annual  dividend  required  to  be 
made  by  the  Bank  of  Tennessee,  of  $100,000  for  the  use  of  com- 
mon schools,  and  of  $18,000  for  the  use  of  county  academies,  was 
duly  set  apart  by  the  directors  and  placed  in  the  treasury.  The 
common-school  portion  has  been  distributed  generally  to  the 
counties  in  their  due  proportions."  ^  This  appropriation  of  $roo,- 
000  annually  of  the  profits  of  the  bank  might  with  no  great  stretch 
of  the  fancy  be  considered  as  the  appropriation  of  the  interest  of 
the  surplus  for  education,  for  $100,000  less  the  interest  on  the 
school  fund,  which  was  invested  in  the  bank,'  is  about  seven  per 
cent,  on  the  surplus.* 

paid  in  equal  amounts.  To  the  Hiwassee  road  the  State  was  to  subscribe  as 
much  as  the  stockholders  paid  in,  provided  it  was  not  more  than  $650,000. 
The  Hiwassee  road  was  to  go  from  Calhoun  on  the  Hiwassee  to  Knoxville. 

'  In  the  cashier's  report  (i  Hazard,  361)  the  sum  is  stated  at  $678,373.12,  and 
put  to  the  credit  of  the  bank  as  capital  stock.  This  discrepancy  is  probably  ac- 
counted for  by  the  method  of  payment.  $150,000  was  paid  in  silver,  and  the 
balance  in  post  notes  of  the  banks  payable  in  Philadelphia  at  60,  go,  and  120 
days,  adding  interest. — Report  of  Pres.  of  Bank,  Oct.,  1839  ;  i  Hazard,  292. 
^  I  Hazard,  306. 
'  July  I,  1840,  the  capital  of  the  bank  was  made  up  of  : 

State  bonds $1,000,000.00 

School  fund 115,528.46 

School  fund  (Ocoee)  587,051.90 

Surplus  revenue 1,353.209.55 

$3. 055-789. 91 
Cashier's  statement  ;    3  Hazard,  121. 

*  The  revenue  of  the  school  fund  expended  from  March  i,  1836,  till  Oct.  i, 
1837,  was  $17,705.26,  which  is  about  $ii,ooo  a  year.  $100,000  less  this  income 
equals  $89,000,  or  nearly  seven  per  cent,  on  the  surplus  ;  or  to  present  the  same 
in  a  different  way,  Oct.  i,  1841,  the  capital  of  the  bank  was  made  up  of  the 


SURPLUS  REVENUE.  II3 

But  whatever  views  may  be  accepted  on  this,  point  it  must  be 
said  that  the  law,  though  well  intended,  was  a  failure  in  nearly 
every  direction.'     It  is  true  that  education  received  some  help  but 

Proceeds  of  the  sales  of  six-pei-cent.  State  bonds    .         .         .         $1,000,000.00 
School  fund  collected,  and  proceeds  of  the  sale  of  the  Ocoee 

lands 769.537.31 

U.  S.  surplus  revenue 1,353.209.55 

$3,122,746.86 
(5  Hazard,  267.)  Now  the  $118,000  appropriated  from  the  net  profits  on  this 
capital  is  almost  exactly  six  per  cent,  on  the  whole  school  fund  and  surplus 
revenue. 

'  "  The  benefits  expected  to  be  derived  from  the  act  of  Jan.  19,  1838,  have 
not  been  realized.  The  bank  has  failed  to  effect  the  amelioration  in  our 
pecuniary  affairs  that  its  authors  anticipated,  and  the  expectations  of  the  public 
have  been  sadly  disappointed  ;  nor  has  the  operation  of  the  act  been  more  salu- 
tary and  successful  in  relation  to  other  interests  it  was  intended  to  foster. 
There  is,  probably,  not  another  law  to  be  found  among  our  statutes  that  more 
signally  failed  to  fulfil  the  wishes  of  the  Legislature,  or  one  that  requires  more 
thorough  reversion  and  amendment  in  order  that  it  may  effectuate  the  purposes 
for  which  it  was  designed."  The  State  by  the  provisions  of  the  act  of  Jan.  19, 
1838,  was  to  issue  bonds  in  subscription  of  stock  in  improvement  companies,  so 
soon  as  individuals  subscribed  for  the  other  half  and  deposited  15  per  cent. 
of  the  subscription  (Trotter,  262).  These  State  bonds  had  ruinously  depreciated 
and  great  losses  threatened  those  contractors  who  engaged  to  receive  the  bonds 
of  the  State  in  payment  of  stock  or  for  labor,  unless  the  Legislature  provided 
for  the  emergency.  The  action  of  the  school  system  had  not  been  attended 
with  very  satisfactory  results. — Gov.  Cannon's  message,  Oct.,  1S39  ;  l  Hazard, 
296  ;  partly  in  57  Niles,  137.  Two  years  later  Gov.  Jones  in  his  inaugural 
message,  Oct.,  1841,  pronounced  the  improvement  laws  of  1837  "  impolitic, 
unsafe,  and  wholly  inadequate  to  accomplish  the  objects  contemplated."  They 
were  "loose  and  unguarded,  opening  the  door  by  which  fraud  and  injustice 
might  be  perpetrated  on  the  State  with  the  greatest  facility."  Some  improve- 
ments had  been  made' in  the  law,  but  there  was  room  for  more.  The  State 
Constitution  provided  that  the  common  school  moneys  belonging  to  the  State, 
should  be  a  perpetual  fund,  the  principal  never  to  be  diminished  by  appropria- 
tion, the  interest  to  go  to  education.  The  present  system  was  very  imperfect, 
but  its  influence  had  been  salutary.  The  law  was  "  vague,  indefinite,  and  com- 
plicated," and  its  revision  was  demanded  by  the  best  interests  of  the  State. — 5 
Hazard,  296-7. 

To  cite  a  specific  case  of  unsuccessful  improvements.  The  Hiwasse  Railroad, 
designed  to  extend  from  Knoxville  to  the  Western  Atlantic  R.R.,  at  a  point 


114  SURPLUS  REVENUE. 

not  so  much  as  ought  to  have  been  received,  and  the  provisions  of 
the  law,  as  a  whole,  ended  in  consuming  a  good  deal  of  the  princi- 
pal of  the  school  fund,  as  we  shall  see.  Nor  must  it  be  understood 
that  the  surplus  was  considered  as  a  part  of  the  principal  of  the 
school  fund  ;  on  the  other  hand,  it  is  mentioned  during  these  years 
as  a  resource  of  the  State  for  paying  its  debt,  in  case  the  United 
States  did  not  recall  it.' 

All  of  this  generous  appropriation,  however,  though  regularly 
paid  by  the  bank,  apparently  was  not  expended  for  schools.  The 
following  items  are  found  in  the  financial  report  of  the  State  for 
the  year  ending  in  Oct.,  1846. 

RECEIPTS    OF    THE    STATE. 

Bank  of  Tennessee,  for  schools       .         .       $100,000 
"  "  "     academies  .  18,000 


)i  18,000.00 


EXPENDITURES   OF    THE    STATE. 

For  common  schools    ....       $65,083.78 
"    academies 11,931.36 


$77,015.14 

Leaving  a  remainder  of  .         .         .         .         .     $40,984.86 

near  the  Tennessee  line,  about  100  miles,  was  begun  in  1826  ;  about  70  miles 
were  graded  at  a  cost  of  $1,000,000,  when  the  company  had  to  stop  on  account 
of  financial  difficulties.  Strong  efforts  were  made  to  resume  it,  but  without 
success. — Am.  Aim.,  1849,  290. 

The  Louisville,  Cincinnati,  and  Charleston  Co.  had  abandoned  work  as  far 
as  Tenn.  was  concerned  before  Oct.,  1841  (5  Hazard,  347).  And  in  1844  the 
company  surrendered  $32,000  of  5  per-cent. -improvement  bonds  to  the  State 
which  were  cancelled  (67  Niles,  340).  The  total  amount  issued  for  this  road 
was  $560,000. 

These  bonds  could  be  withdrawn  under  certain  conditions  (63  Niles,  119), 
and  the  above  is  doubtless  a  case  of  withdrawal. 

Considerably  later  than  this,  in  1849,  Gov.  N.  S.  Brown  called  the  improve- 
ment  act  of  1837-8  "  an  indiscriminate  policy,  that  if  persevered  in  would  bank- 
rupt any  state  in  the  world."  "  The  tendency  was  to  construct  any  and  every 
sort  of  road  without  reference  to  its  importance  or  value." — 4  Bankers'  Mag., 
484-6. 

'  1841,  5  Hazard,  274  ;  1843, 64  Niles,  245  ;  1853,  Am.  Statist.  Ann.,  1854,289. 


SURPLUS  REVENUE.  II5 

of  the  disposal  of  which  nothing  is  said.'  Judging  from  the  prac- 
tice of  the  neighboring  States  it  probably  went  into  the  general 
fund. 

We  now  come  to  the  time  when  the  effects  of  the  law  of  Jan. 
19,  1838,  had  begun  to  bear  down  on  the  bank  which  it  had 
created.  In  T849  Gov.  Neil  S.  Brown  ^  called  attention  to  the  fact 
that  the  fixed  charges  on  the  bank  threatened  to  bankrupt  it, 
though  it  had  been  profitably  managed,  and  to  consume  the  school 
fund  as  well  as  the  surplus  revenue.  This  finally  came  to  pass. 
In  1865  Gov.  Brownlow  declared  the  bank  hopelessly  insolvent. 

Feb.  16,  1866,  an  act  was  passed  to  wind  up  and  settle  the  busi- 
ness of  the  bank.  After  the  assignment  of  the  assets  the  first  fund 
to  be  secured  was  the  ^1,500,000  of  school  fund.* 

The  conclusion  in  regard  to  the  surplus  is  that  it  was  used  up 
either  in   providing  for  the  general  expenses  of  the  State  or  in 

^  I  Bankers'  Mag.,  365. 

'  In  general  he  said  :  The  bank  was  suffering  a  constant  loss  of  capital.  It 
had  made  seven  per  cent,  since  its  organization,  but  by  State  regulation  it  had 
to  meet  imposed  liabilities  that  would  require  a  profit  of  ten  or  eleven  per  cent.: 
e.  g.,  the  real  capital  of  the  bank  did  not  exceed  2^  million  ;  seven  per  cent,  of 
that  was  $175,000  per  year  ;  but  in  1847  the  stated  liabilities  amounted  to 
$271,712.87.  Here  then  was  a  deficit  of  $96,712.87  to  be  taken  from  the  capital. 
Further,  no  account  was  taken  of  the  increased  liabilities  and  current  drain  of 
capital.  The  bank  began  July  i,  1838,  with  $3,226,976.82  capital,  and  by  July 
I,  1849,  $800,000  had  been  lost,  it  was  believed.  At  that  rate  the  whole  capital 
would  be  gone  in  sixteen  years.  [This  prophecy  was  almost  exactly  fulfilled  as 
to  time.  Note  the  date  given  in  the  text.]  The  bank  ought  to  be  either  discon- 
tinued or  disencumbered.  Under  the  existing  policy  the  dissipation  of  the 
capital  must  result  before  long.  "  That  capital,  as  is  well  known,  embraces  the 
common-school  fund  and  the  surplus  revenue — if  the  latter  should  ever  be  called 
for,  it  would  present  us  a  melancholy  alternative, — while  there  is  little  probability 
that  the  former  would  ever  be  supplied,  however  solemnly  it  has  been  pledged 
by  the  Constitution,  and  however  ardently  it  has  been  cherished  by  the  friends  of 
education." — 4  Bankers'  Mag.,  4S4-6. 

'Acts,  1865,  g.  He  says  also  that  the  school  fund  had  "  been  squandered  by 
bad  men  and  dishonest  functionaries,  who  fled  at  the  approach  of  the  old  flag." 
It  seems  more  probable  that  the  fund  had  suffered  with  the  rest  of  the  bank's 
capital,  than  that  this  accounts  wholly  for  its  loss. 

^  Acts,  1865-6,  38.  The  fund  was  reorganized  in  the  Constitution  of  1870. 
Art.  xi.,  §  12. 


Il6  SURPLUS  REVENUE. 

paying  interest  on  bonds  issued  for  internal  improvement?  which 
failed,  and  that  the  interest  was  used  in  part  for  the  same  purpose, 
and  in  part  to  promote  education." 

Vermont  Received  $669,086.79. 
Gov.  Jennison  recommended  that  the  income  of  the  surplus  be 
applied  to  the  support  of  normal  and  primary  schools.^      Partially 
following  the  governor's  advice,  the  money  was  accepted  and  dis- 
posed of  in  Nov.,   1836,  as  follows:  It  was   divided  among  the 

'  There  is  one  reference  to  the  surpkis  and  the  school  fund  which  has  been 
omitted  in  the  text  and  reserved  for  notice  here  on  account  of  the  hitherto  in- 
explicable confusion  of  the  statements. 

Jan.  I,  1859,  the  capital  stoclc  of  the  Bank  of  Tennessee  Avas  readjusted,  "  and 
the  school  fund  constituting  a  portion  of  the  capital  stock  was  as  follows  : 
School  fund $215,648.35 


"         "     Ocoee 

"     U.  S.  public  lands 
Surplus  revenue  (one  half) 
Ledger  balance 


576,536.81 
11,189.80 

466,439.59 
44,621.18 


$1,414,434.73. 

Report  of  John  Eaton,  Superintendent  of  Public   Instruction,   1869,  p.  of 
Appendix  103. 

If  we  are  to  understand  by  this  that  of  the  whole  surplus  only  twice  $466,- 
439.59  was  left,  and  that  that  sum  had  been  credited  to  the  school  fund,  the  only 
difficulty  then  is  to  account  for  the  missing  part  of  the  surplus  ;  but  if  we  look 
into  the  Index  to  the  scliool  laws  which  were  compiled  and  published  with  the 
acts  of  1853-4  (page  61  of  the  Index),  we  find  among  the  sources  of  the  school 
funds  "one  half  of  surplus  revenue  from  U.  S.,"  and  reference  is  made  to  the 
3d  Sect,  of  the  act  of  Feb.  3,  1842  (Acts,  1841-2,  209) ;  but  by  this  act  one 
half  of  what  Tennessee  received  from  the  distribution  of  the  proceeds  of  public 
land  sales  was  deposited  in  the  Bank  of  Tennessee  as  a  part  of  the  common 
school  fund.  Acts,  1S42-3,  210.  This  however  creates  the  difficulty,  for  Ten- 
nessee received  no  such  sum  as  $932,879.18  from  the  land  sales.  Her  share  in 
the  $562,144.18  to  be  distributed  from  the  proceeds  of  land  sales  from  Jan.  1st 
to  June  30,  1842,  was  $26,446.68.  Up  to  December  10,  1842,  the  news  had  come 
that  one  or  two  States  had  received  their  shares,  while  others  had  resolved 
not  to  receive  theirs.  Among  the  refusing  States  were  South  Carolina  and  Vir- 
ginia. The  land  receipts  from  July  ist  to  the  passage  of  the  tariff  bill,  when 
the  distribution  ceased,  had  not  been  published  then,  but  probably  would  not 
exceed  $184,000. — 63  Niles,  226.  Some  one  of  the  above  authorities  has 
evidently  made  a  mistake.  It  is  possible  that  the  phrase  "one  half"  ought  to 
go  with  "  U.  S.  public  lands,"  and  then  every  thing  would  be  clear,  except  the 
fate  of  the  missing  part  of  the  surplus  of  1837.  '51  Niles,i6o. 


SUJiPLUS  REVENUE.  II7 

towns  on  the  basis  of  population,  and  was  to  be  loaned  on  sufficient 
security  at  six  per  cent,  interest.  For  this  purpose  three  trustees 
were  to  be  elected  in  each  town.  After  every  census  the  money 
must  be  newly  apportioned.  The  interest  the  towns  were  to  apply 
to  the  support  of  schools,  or  if  they  had  other  funds  sufficient 
to  support  schools  in  their  several  school  districts  for  six  months  in 
each  year  they  could  apply  the  interest  to  any  object  they  might 
choose.  Among  the  districts  the  "  income  was  to  be  divided 
in  the  same  manner  as  that  raised  by  the  three-per-cent  assessment 
on  the  grand  list."  If  the  towns  did  not  draw  the  principal  they 
might  draw  the  interest  from  the  treasurer  of  the  State  who  was 
to  put  their  shares  to  use.  The  towns  were  accountable  to  the 
State  when  the  State  Treasurer  should  require,  on  requisition  from 
the  United  States,  or  for  the  purposes  of  new  division. 

In  cases  of  breaches  of  this  act  the  Grand  Jurors  were  to  present 
indictments  against  each  town  so  charged,  and  if  the  town  should 
be  convicted  it  must  pay  a  fine  not  exceeding  double  the  annual  in- 
terest of  its  deposit  and  costs,  which  fine  and  costs  were  to  be  for 
the  use  of  the  county.' 

The  general  tenor  of  this  law  has  never  been  changed.  An  in- 
vestigation instituted  this  year  shows  "  that  most  of  the  towns 
apply  the  income  of  the  surplus  revenue  fund  of  1837  to  the  sup- 
port of  schools.  The  several  towns  have  invested  and  keep 
the  income  separate  for  school  purposes,  or  have  conveyed  it  into 
the  treasury,  and  annually  raise  a  sum  by  tax  equal  to  the  interest 
of  the  same,  for  the  support  of  common  schools.  A  few  towns  may 
fail  to  do  this,  but  most  do  it."^ 

Vermont  once  had  another  school  fund  of  about  ^200,000 
but  the  State  borrowed  it  and  then  abolished  it  instead  of  paying 
the  debt.^    The  deposit  is  now  called  a  "  school  fund."    The  State 

>Z.  Thompson,  "  Hist,  of  Vermont,"  part  2,  142  ;  Acts  of  1836,  11  ;  Rev. 
Statutes  of  1839,  119  ;  Compiled  Statutes,  1850,  155  ;  General  Statutes,  1862, 
163  ;  Revised  Laws,  1880,  184. 

^  Letter  from  the  State  Supt.  of  Ed.  In  1843  about  half  the  interest  was  so 
applied. — Am.  Al.,  1S45,  208. 

'  Am.  Aim.,  1846,  208,  and  1847,  221.  In  1851  the  office  of  State  Superin- 
tendent was  abolished  and  no  school  returns  made  for  some  time. — Am.  Aim., 
1S55,  22S. 


Il8  SURPLUS  REVENUE. 

has  borrowed  the  shares  of  some  towns,  and  such  loans  of  from 
one  to  fifteen  thousand  or  more  dollars  have  existed  from  the  begin- 
ning. Probably  in  most  cases  these  loa'ns  were  merely  instances 
where  the  towns  did  not  draw  the  money  which  was  invested 
by  the  State.  ' 

It  will  be  noticed  that  Vermont  and  Connecticut  made  almost 
the  same  use  of  the  surplus  revenue;  the  similarity  is  closer  than 
exists  between  any  two  States  that  have  kept  part  of  the  money  to 
the  present  day. 

Virginia  Received  $2,198,427.99. 

The  surplus  was  accepted  as  a  deposit  by  the  act  of  December 
20,  1836,  in  which  pains  was  taken  to  declare  that  it  was  unjust 
to  raise  revenue  for  distribution.'^ 

On  the  20th  of  March,  1837,  an  act  was  passed  increasing  the 
banking  capital  of  the  State  ;  by  this  act  the  State  was  to  subscribe 
for  half  the  increased  stock  from  the  surplus  revenue.  According 
to  this  provision,  the  State  was  to  subscribe  for 

$325,000  worth  of  stock  in  the  Bank  of  Virginia,  and  for 
505,000       "         "  in  the  Farmers'  Bank  of  Virginia. 


$830,000 
This  sum  was  to  be  paid  from  the  instalments  already  received. 
Further,  from  the  instalments  of  July  and  October  (any  deficiency 
was   to  be  supplied  from   the  first    two  deposits)    the    following 
amounts  of  stock  were  to  be  bought  : 

$370,000  in  the  Bank  of  the  Valley  of  Virginia. 
250,000  in  the  Northwestern  Bank  of  Virginia,  at  Wheeling, 
150,000  in  the  Merchants'  and  Mechanics'  Bank,  at  Wheeling. 
900,000  in  the  Exchange  Bank  of  Virginia. 

$1,670,000 
The  residue  was  to  be  loaned  as  the  executive   of   the   Bank  of 


1  Am.  hXxa..,  passim.  "  The  State  owes  several  towns,  for  the  U.  S.  surplus 
fund  deposited  and  left  on  interest,  $14,528.94,  which  is  all  loaned  out  agree- 
ably to  law  on  good  securities." — i  Bankers'  Mag.,  372  (1846). 

"Acts,  1836-7,  7  ;  51  Niles,  274. 


S URPL  US  RE  VENUE.  1 1 9 

Virginia  saw  fit,'  or  it  was  to  be  loaned  to  the  Bank  of  Virginia 
and  to  the  Farmers'  Bank  of  Virginia  at  five  per  cent,  yearly,  with 
the  right  reserved  to  convert  this  loan  into  stock."  With  the 
fourth  instalment  this  residue  would  be  about  $300,000. 

Four  days  later,  it  was  enacted  that  "so  much  of  the  profits  or 
principal  of  the  surplus  fund  on  deposit  in  the  treasury  of  this 
commonwealth,  as  shall  be  requisite  to  supply  any  deficiency  in 
the  receipts  of  the  present  fiscal  year,  shall  be  subject  to  the  war- 
rants of  the  auditor  of  public  accounts  to  defray  the  legal  and 
necessary  expenses  of  the  commonwealth."  " 

June  24th  an  act  for  the  temporary  relief  of  the  banks  sus- 
pended so  much  of  the  act  of  March  25th  as  touched  the  Bank  of 
Virginia,  the  Farmers'  Bank  of  Virginia,  and  the  Bank  of  the  Val- 
ley of  Virginia  till  March  i,  1838.  This  act  relieved  them  from 
increasing  their  capital,  allowed  them  to  suspend  specie  payments, 
and  empowered  the  treasurer  to  loan  out,  at  good  security,  at 
not  less  than  five  per  cent,  per  annum,  the  surplus  revenue  that 
was  to  be  subscribed  to  these  banks.  Further,  these  banks  could 
borrow  without  security  as  much  as  was  to  be  subscribed  to  the 
stock.* 

At  the  same  time  the  treasurer  was  authorized  to  detain  out  of 
the  surplus  revenue  enough  to  discharge  all  claims  on  the  treasury, 
which  should  be  duly  audited,  whether  government  expenses  or 
interest  on  improvement  loans.  So  much  as  should  be  paid 
upon  loans  was  to  be  put  to  the  credit  of  the  board  of  public 
works.' 

The  relief  to  the  banks  was  extended  on  Feb.,  20,  1838,  till 
March,  20th,  twenty  days,  and  the  time  to  increase  the  capital 
was  extended  till  April  first.  As  the  20th  of  March  approached 
the  limit  of  the  relief  was  placed  at  the  end  of  the  session.^ 

'  P.  72,  of  Acts,  1836-7.     General  ref.,  ibid.,  68-74.     These  two  statements 
are  not  alternatives  in  the  text,  but  such  seems  to  be  the  sense  of  the  law. 
'  P,  73,  of  Acts,  1836-7. 

*  Acts,  1836-7,  6  ;  52  Niles,  273. 

*  Acts  of  Extra  Sess.,  June,  1837,  4. 

*  Acts  of  Extra  Session,  June  1837,  7,  ^d  5,2  jfcifiks,  273. 

» Acts  of  1838, 77.     Wcstrr.imter  Oda  reilows 

Free  Librai^  and  Reading  R0dm,.7 


I20  , SURPLUS  REVENUE. 

One  case  of  a  loan  of  the  surplus  can  be  mentioned.  In  1837 
the  executive  loaned  $98,065.83  to  the  Richmond  and  Petersburg 
Railroad  Co.  The  company  failing  to  pay  the  interest  repaid  the 
loan  in  part  by  returning  a  draft  for  $100,000  gn  the  Board  of 
Public  Works  which  had  been  granted  to  the  railroad.  There  was 
left  then  a  deficit  of  $11,993.^ 

Either  at  this  time  or  later  $225,792.93  "  surplus  revenue  "  ap- 
pears to  have  been  added  to  the  literary  fund."  During  the  war 
the  income  of  this  fund  was  ordered  to  be  applied  to  the  military 
defence  of  the  State.  $216,000  was  actually  paid  to  the  State 
under  this  ordinance,  and  the  rest  was  realized  by  the  State  by 
not  paying  interest  on  its  own  obligations  in  the  hands  of  the 
fund.  No  aid  for  schools  to  speak  of  has  since  been  derived  from 
the  fund.' 

With  this  meagre  statement  the  account  of  the  surplus  in  Vir- 
ginia, so  far  based  upon  direct  statements  must  end,^  but  there 
are  grounds  for  probable  conjecture.  It  seems  likely  that  some 
of  the  bank  stock  was  turned  over  to  the  internal  improvement 
fund  later,  for  among  the  chief  sources  of  State  income  in  1855 
we  find  the  "surplus  revenue  internal  improvement  fund" 
$162,591,'  and  in  1857  the  same  item  was  $130,000."  No  further 
explanation  was  found,  and  this  may  not  refer  to  the  U.  S.  surplus 
of  1837. 

>  59  Niles,  232. 

^  School  Report,  1871,  198.  It  is  not  stated  whether  this  surplus  was  the 
U.  S.  surplus,  and  it  may  have  been  rash  to  make  that  assumption  in  the  text. 

'  In  1871  it  was  stated  :  "  No  payments  or  receipts  of  any  description  have 
been  made  since  the  war  on  account  of  the  literary  fund,  nor  has  any  interest 
accrued  to  the  State  been  funded." — Ibid.,  200.  An  inspection  of  later  reports 
shows  that  very  little  is  now  received  from  the  fund,  which  nominally  amounts 
to  $1,877,364.68. 

^  The  treasurer  of  the  State  writes  that  the  House  Documents  of  the  present 
Congress  (1S83-4)  are  to  contain  full  information  on  the  use  of  the  surplus. 
Unfortunately  this  document  is  inaccessible  at  the  present  writing.  The  state- 
ment was  probably  made  in  connection  with  Virginia's  application  for  the 
fourth  instalment.— See  page  43. 

'  Am.  Aim.,  1857,  283. 

°  Am.  Aim.,  1859,  280. 


SURPLUS  REVENUE.  121 

About  this  time  the  State  owned  stock  in  improvement  com- 
panies to  the  amount  of  $18,359,226,  and  held  bonds  and  certifi- 
cates of  loans  besides,  which  raised  the  amount  to  about 
$24,000,000  par  value.  The  real  value  was  unknown  and  the 
property  was  much  depreciated.'  The  following  testimony  is  of 
considerable  value  :  "  The  portion  [of  the  State  debts  for  capital 
borrowed]  put  to  banking  was  totally  lost,  and  what  was  expended 
in  roads  and  canals  nearly  so,  for  most  of  them  lie  unfinished,  or 
lead  to  points  where  such  works  are  not  wanted,  or  would  not  pay 
the  interest  on  their  construction."^  These  are  the  words  of  a 
man  who  represented  Virginia  in  Congress  from  1816  to  1840,  and 
who  favored  distribution  in  1836.^  If  the  surplus  had  been  used 
differently  than  the  borrowed  capital  in  Virginia,  or  if  Virginia 
was  a  marked  exception  among  the  States  in  this  regard,  it  seems 
altogether  probable  that  Mr.  Mercer  would  have  qualified  this 
statement.  As  it  stands  it  leads  one  to  suspect  that  his  views 
were  formed  to  a  certain  extent  on  what  he  saw  in  Virginia. 

Before  leaving  the  special  subject  of  the  surplus  in  the  States, 
it  is  best  to  say  a  word  in  reference  to  the  character  of  the  forego- 
ing pages.  The  facts  were  gathered  from  very  many  sources  and, 
in  general,  were  unattended  by  any  critical  remarks.  Oftentimes 
the  only  available  source  of  information  has  been  the  statute- 
book,  which  tells  what  it  was  proposed  to  do  rather  than  what  was 
done,  for  many  fine-sounding  laws  were  inactive.  On  account  of 
this  peculiarity  in  respect  to  the  sources  of  knowledge,  it  is  very 
highly  probable  that  a  much  more  favorable  light  has  been  cast 
upon  the  whole  operation  than  would  be  shed  were  critical  in- 
formation attainable. 

Contemporary  references,  though  few,  generally  present  a 
blacker  picture  than  is  drawn  in  the  investigation.  Horace 
Greeley,  as  early  as  October  7,  1837,  wrote  :  ''  Two  thirds  of  the 

•Am.  Aim.,  1858,  286. 

"  Exposition,  etc.,  by  Charles  Fenton  Mercer,  p.  157.  See  also  other  ex- 
tracts,  pp.  132  and  222,  quoted  on  pp.  124  of  this  work. 

^  I  Benton,  707.  Mr.  Mercer  tried  to  have  the  States  released  from  their 
obligations  to  return  the  money. 


122 


SURPLUS  REVENUE. 


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124  StjRPLUS  REVENVE. 

States  have  mismanaged  and  misapplied  this  great  fund  in  such  a 
miserable,  time-serving,  popularity-hunting  fashion,  that,"  etc/ 

Charles  Fenton  Mercer,  an  advocate  of  distribution,  said, 
later,  that  the  surplus  deposited  "  was  used  up,  generally  speaking, 
in  some  visionary  project,  or  it  was  distributed  in  some  way  to 
the  emolument  of  party  and  wasted  by  demagogues."  ^  And 
again  :  the  States  wasted  it  as  they  had  done  millions  before 
— or  what  was  infinitely  worse,  the  dominant  politicians  got  hold 
of  it  and  under  pretence  of  supporting  schools  or  doing  some  work 
for  the  State,  they  and  their  abettors  used  it  up."  '  Benton's 
severe  comments  are  well  known  and  need  not  be  quoted  in  detail.'' 
In  brief,  he  finds  no  good  effects  of  the  bill  and  various  hurtful 
consequences,  such  as  corruption,  extravagance,  and  useless  waste 
of  money.  But  these  general  effects  will  be  considered  more  par- 
ticularly in  the  following  chapter. 

'  The  New  Yorker,  March  24,  1837.  The  N.  Y.  yoiirnal  of  Commerce  pro- 
nounced "  the  surplus  a  curse  and  distribution  a  greater  curse." 

^  Exposition,  etc.,  132.  It  is  only  fair  to  say  that  Mercer  appears  as  an  ex- 
treme pessimist  in  this  book. 

'  Ibid.,  121. 

*  2  Benton,  39. 


CHAPTER   XII. 

SOME    GENERAL   EFFECTS   OF    THE    ACCUMULATION    AND   DISTRIBU- 
TION OF    THE  SURPLUS,  ESPECIALLY  UPON  THE  INTERNAL 
IMPROVEMENT    SYSTEM. 

CONCLUDING    REMARKS. 

The  origin  and  growth  of  the  surplus,  the  legislation  and  feel- 
ing concerning  it,  and  the  various  uses  to  which  it  was  applied  by 
the  States,  have  all  been  described,  and  now  it  only  remains  to 
call  attention  to  the  relations  between  the  surplus  and  the  internal 
improvement  craze,  and  to  note  some  of  the  effects  of  the  distribu- 
tion. In  general,  the  growth  of  the  surplus  was  followed  by  a 
considerable  increase  in   Government   expenses,'    legitimate   and 

^  "  One,  and  not  the  least,  of  the  evils  resulting  from  a  surphis  revenue  is  an 
extraordinary  increase  of  our  Federal  expenses."  A  part  of  the  general  increase 
was  attributed  to  the  Indian  wars,  and  then  the  report  continues  :  "  Unless 
prompt  measures  are  taken  to  reduce  our  revenue,  we  may  anticipate  a  rapid 
increase  of  our  expenses,  and  the  recurrence  of  another  surplus  for  deposit  or 
distribution." — Report  of  the  Com.  of  Ways  and  Means.  51  Niles,  326  (Jan. 
21,  1837). 

The  average  annual  expenditure,  exclusive  of  the  public  debt,  for  the  twelve 
years  preceding  1836  was  $15,063,000.  The  expenditure  for  1836  was  $30,- 
868,164,  and  for  1837  $39,164,745. 

"  The  above  sums  include  payments  for  trust  funds  and  indemnities,  which 
in  1837  were  $5,610,404.36." — 54  Niles,  320. 

Mr.  Duncan,  of  Ohio  (July  7,  1838),  a  Jackson  man,  in  reply  to  Mr.  Bond, 
who  had  upbraided  the  Jackson  men  for  extravagance,  mentions  three  instances 
of  inexcusable  extravagance  that  were  supported  by  the  opposition  :  ist.  $1,500,- 
000  for  a  canal  through  the  suburbs  of  Washington.  He  had  looked  out  on 
that  canal  seven  months  and  had  not  seen  a  boat  on  it.  "  Unpardonable 
folly."  2d.  An  appropriation  for  a  turnpike  road,  made  at  great  expense  on 
the  bank  of  the  Ohio  and  Chesapeake  Canal.  3d.  A  turnpike  parallel  with  this  : 
the  existence  of  the  one  superseded  the  necessity  of  the  other.  He  had  ridden 
six  or  seven  times  on  these  roads  for  exercise,  and  had  seen  only  one  shackly 

135 


126  SURPLUS  REVENUE. 

illegitimate,  and  an  astonishing  prevalence  of  official  recklessness 
and  dishonesty  in  the  Government  finances,  not  to  say  of  gigantic 
frauds  and  barefaced  plundering  of  the  Treasury,' 

Such  results,  however,  are  to  be  expected  when  a  surplus  exists, 
and  in  some  respects  are  so  well  illustrated  at  the  present  day,  as 
not  to  need  any  extended  discussion. 

But  when  the  effect  of  the  surplus  in  the  States  is  to  be  esti- 
mated, another  feature  of  the  times,  the  widespread  enthusiasm 
for  internal  improvements,  demands  attention,  and,  indeed,  the 
two  subjects  are  wellnigh  inseparable. 

The  desire  for  internal  improvements  was  early  manifested 
in  this  country.  The  lack  of  convenient  means  of  communication 
was  a  great  hindrance  to  the  development  of  the  newly  settled  re- 
gions, and  in  a  general  system  of  improvements  all  classes  saw 
great  advantages  :  the  land-owner  saw  his  land  rapidly  rising  in 
value,  the  farmer  saw  new  and  valuable  markets  opened  to  him, 
and  the  laborer  saw  brisk  work  and  high  wages. 

Though  in  Congress  the  system  met  with  continued  opposition 
from  the  strict  constructionists  on  constitutional  grounds,  the 
spirit  of  improvement  grew  steadily  among  the  people,  until  by 
the  invention  of  the  railroad,  it  received  a  great  impulse  which 
fairly  turned  people's  heads.  The  contagion  spread  and  attacked 
the  old  and  new  communities  alike.  It  will  not  lead  me  too  far  a 
field  to  present,  in  the  text  and  notes,  some  materials  which  are 
not  only  interesting  at  the  present  day,  but  indispensable  in 
forming  an  idea  of  the  system.  For  this  purpose  a  glance  at  the 
movement  in  Illinois  will  be  perhaps  sufficient.  One  who  lived 
through  the  period  writes:  "In  1836  the  fever  of  internal  im- 
provements raged  throughout  most  of  the  States  of  the  Union. 

team  on  one,  and  never  a  living  animal  except  his  own  horse  on  the  other. 
"  Extravagant,"  worthless,"  "wicked."  But  the  most  profligate  and  extravagant 
appropriation  was  for  the  Georgetown  and  Alexandria  Canal  and  Aqueduct.  The 
canal  was  underway,  was  right  "  on  the  bank  of  the  Potomac — a  canal,  deep, 
still,  and  wide,  being  tide  water." — 54  Niles,  375.  See  Bolles,  "  Financial 
History  of  the  U.  S."  (17S9-1860),  pp.  554-566,  for  other  notable  instances  of 
extravagance,  and  also  3  Calhoun,  498-499. 
'  See  Bolles,  ibid. 


SURPLUS  REVENUE.  1 27 

Pennsylvania,  my  native  State,  was  crazy  to  improve  the  whole 
country,  whether  the  wants  of  the  people  required  it  or  not.  In- 
diana was  almost  as  wild  ;  and  Illinois,  also,  was  ^ras^^ considera- 
bly with  the  mania."  The  movement  had  begun  in  Illinois  in 
1832,  and  had  rolled  on  with  increasing  momentum  till  1836,  when 
the  law  (/.  e.^  the  improvement  bill)  was  passed.  It  was  not  the 
fault  of  the  politicians  but  of  the  people  who  clamored  for  it ;  ^  the 
people  would  not  trust  their  representatives,  but  sent  on  delegates 
to  lobby.  The  bill  of  1836-7  authorized  a  loan  of  ^8,000,000  for 
building  1,300  miles  of  railroad,  and  improving  five  rivers. 
$200,000  was  to  be  distributed  throughout  the  counties  which 
received  no  improvements.^ 

The  fever  raged  at  the  next  Legislature,  and  $800,000  more  was 
borrowed.  "  The  people  were  perfectly  insane  on  the  subject," 
and  beyond  the  reach  of  argument  ;  the  banks  then  failed,  money 
could  not  be  obtained,  and  a  called  session  of  1838-9  had  to  re- 
peal the  acts,  and  provide  for  winding  up  the  business.'  The  law 
had  provided  that  the  work  should  begin  on  all  improvements  at 
the  same  time,  and  so  nothing  had  been  completed  except  the  rail- 

'  Another  writer,  William  S.  Wait,  in  a  letter  to  BickneWs  i?^'/or/^r  disagrees  -^of  <^ 
with  the  above  statement.     "  Our  population  is  thinly  scattered  over  a  large  "  ^'  ' 

territor}'  ;  strangers,  not  only  to  the  country,  but  to  each  other,  and  but  little 
acquainted  with  the  men  who  compose  the  legislative  body,  and  with  the  motives, 
other  than  those  which  should  promote  the  general  welfare  {sic)  that  actuate 
them." — 61  Niles,  244  (Dec,  1841). 

^  "  The  manner  in  which  th-is  young  State  has  thus  involved  itself  is  made 
evident  by  this  single  paragraph  from  the  governor's  message  :  '  I  am  aware 
that  the  system  is  the  result  of  mutual  concession  and  compromise,  and  that  its 
advantages  were  to  be  dispensed  as  equally  as  possible  throughout  the  State, 
by  the  construction  of  improvements  in  almost  every  county,  and  appropriating 
to  those  in  which  no  improvements  were  to  be  made  $200,000  in  lieu  thereof.' 
This  is  the  most  comprehensive  system  of  log-rolling,  softly  referred  to  by  the 
governor  as  'mutual  concession  and  compromise,'  that  we  have  any  record  of," 
—57  Niles,  356  (Jan.,  1840). 

*  "  The  Illinois  improvement  system  still  continues  to  create  a  great  excite- 
ment in  Illinois.  At  a  meeting  lately  held  in  Peoria,  strong  resolutions  were 
adopted  recommending  its  '  total  abandonment,' notwithstanding  the  admission 
that  such  a  step  would  involve  a  sacrifice  of  $4,000,000." — 56  Niles,  36S  (Aug., 
1839). 


128  SURPLUS  REVENUE. 

road  from  Springfield  to  the  Illinois  River.'  This  road  was  of  no 
advantage  to  the  State,  and  was  ordered  to  be  sold  for  what  it 
would  bring.  Though  it  cost  the  State  over  ^1,000,000,  it  sold 
for  only  $100,000  in  State  indebtedness.  The  population,  though 
poor  and  embarrassed  with  private  debts,  was  left  with  a  State 
debt  of  $14,237,348.^  The  following  extract  describes  the  con- 
dition of  affairs  in  five  of  the  improvement  States  :  "  There  are 
constructing  in  the  five  Western  States  of  Ohio,  Kentucky,  In- 
diana, Illinois,  and  Michigan  : 

"  Of  canals,  about  ....  1,250  miles 

"  Of  slackwater  navigation    .  .         .  750      '' 

'  "  A  correspondent  of  the  St.  Louis  Argus  gives  the  following  brief  account 
of  the  condition  in  which  things  will  be  left  by  the  Legislature  :  Out  of 
300  miles  of  railroad  some  20  are  completed,  the  rest  in  every  stage  between 
completion  and  commencement — embankments  half  formed,  bridges  half  built, 
an  immense  amount  of  timber  lying  on  the  ground  ;  the  first  is  left  to  wash 
away,  the  second  to  tumble  down  and  decay,  the  last  to  rot  in  utter  uselessness. 
unless  some  kind  persons  will  take  it  for  firewood  or  fences.  A  large  amount 
of  contracts  are  now  abandoned  by  the  State." — 57  Niles,  402. 

"  The  condition  of  Illinois  is  truly  deplorable.  We  first  see  her  immense  in- 
ternal improvement  fund  squandered  by  profligate  Legislatures  as  commissioners, 
so  that  after  an  investment  of  over  $10,000,000  for  public  works,  scarcely  a  mile 
of  her  canals  and  railroads  has  yet  been  completed  so  as  to  afford  an  income  to 
the  State."  (The  second  disaster  was  trouble  with  the  State  bonds.) — 61  Niles, 
247. 

"Abridged  from  Reynolds'  "My  Own  Times,"  324-5.  In  1841  the  debt 
was  estimated  at  $17,500,000  to  $19,125,000.  In  1840  the  population  of  the 
State  was  476,183,  and  of  Chicago,  4,470  (in  1880,  503,185). — Am.  Aim.,  1842, 
252.  In  Gov.  Carlin's  Message  of  Dec,  1842,  the  proposed  methods  of  paying 
for  the  improvements  are  explained.  In  brief  :  Six-per-cent.  State  bonds  were 
issued  to  be  reimbursable  after  a  long  term  of  years  ;  the  interest  on  these  was 
to  be  paid  by  negotiating  them  in  foreign  markets  and  realizing  the  difference 
of  exchange,  by  depositing  the  money  thus  raised  with  banks  until  it  should  be 
disbursed,  and  by  receiving  premiums  upon  it.  Further,  bank  stock  was  to  be 
subscribed  for,  "  the  dividends  upon  which,  it  was  expected,  would  greatly  ex- 
ceed the  interest  upon  tbe  bonds  with  which  the  stock  was  purchased."  "  Thus 
it  was  contemplated  by  the  advocates  of  this  policy  to  complete  those  extensive 
improvements  without  any  expense  to  the  State  during  the  process."  When 
finished  the  tolls  would  pay  the  interest  and  principal  of  the  cost. — 63  Niles, 
297. 


SURPLUS  REVENUE. 


129 


"  Of  railroads 

"  Of  McAdam  roads 

"  Total     . 


1,540  miles 
1,400      " 

4,940  miles, 


making,  in  the  general  aggregate  of  work  to  which  the  States  are 
parties,  about  5,000  miles  of  artificial  communications.  Of  labor- 
ers directly  employed  on  the  works  there  are  supposed  to  be  at  the 
lowest  estimate  not  less  than  20,000  during  the  greatest  portion  of 
the  year.  If  to  these  we  add  the  numerous  body  of  public  officers, 
engineers,  contractors,  agents,  store-keepers,  and  the  ordinary  pro- 
portion of  families,  we  shall  find  a  population  of  not  less  than  one 
hundred  and  fifty  thousand  who  are  dependent  upon  the  public 
works  of  the  Western  States.  The  expenditures  now  annually 
amount  to  between  four  and  five  million  of  dollars,  and  the  sum 
total  of  money  solemnly  pledged  by  legislative  enactments  to  the 
completion  of  these  works,  with  what  has  already  been  expended 
on  them,  is  at  least  the  enormous  sum  of  forty-eight  millions  of 
dollars.  To  this  sum  we  may  add  at  least  $5,000,000  pledged  on 
the  part  of  individuals,  and  large  sums  for  the  completion  of  the 
national  road.  Of  this  aggregate  about  $10,000,000  have  already 
been  expended,  and  it  is  within  bounds  to  say  that  an  amount 
fully  equal  to  the  sum  total  will  be  expended  on  these  and  similar 
undertakings  within  the  next  eight  years."  ' 

How  far  short  this  was  to  come  of  the  real  facts  appears  from 
the  following  list  of  the  debts  of  the  "  Delinquent  States,"  or  States 
that  failed  to  pay  the  interest  on  their  loans.  The  list  is  dated  less 
than  six  years  after  the  above  was  written. 


Pennsylvania 
Maryland 

Mississippi 
Louisiana 
Arkansas 
Illinois  . 


DEBT. 

$40,835,013 
11,387,285 

7,000,000 
20,558,000 

3,000,000 
11,454,170 


'  56  Niles,  262  (June,  1839). 


130  SURPLUS  REVENUE. 

DEBT. 

Indiana  '......         $13,349,500 

Michigan 4,077,178" 

Of  course  it  would  not  be  safe  to  assume  that  the  whole  amount 
of  these  several  debts  had  been  expended  in  internal  improve- 
ments, but  certainly  by  far  the  greater  part  of  them  had.  As  has 
been  seen  this  great  burden  of  debt  brought  on  the  whole  no 
adequate  recompense  for  the  trouble  and  the  disgrace  of  bank- 
ruptcy. Had  the  money  been  well  spent  and  carefully  husbanded  ' 
the  result  would  have  been  different  in  degree  but  probably  not 
in  character.  The  work  was  undertaken  in  a  heedless,  imprudent 
way,  and  the  conditions  were  unfavorable  to  a  successful  issue. 
When  all  the  circumstances  are  considered — the  log-rolling,  the 

^  The  case  of  Indiana  deserves  a  special  note.  "In  the  fall  of  1839,  the 
purchasers  of  the  State  bonds  having  failed  to  pay,  and  the  credit  of  the  State 
being  no  longer  available,  the  whole  system  of  operations  was  paralyzed.  On 
the  1st  of  November  the  total  expenditures  amounted  to  about  seven  millions, 
and  it  was  then  estimated  that  the  total  cost  of  the  works,  if  completed,  would 
be  about  twenty-three  millions.  Such  was  the  undertaking  of  a  State  whose 
whole  taxable  property,  at  the  time  the  system  bill  passed,  did  not  exceed, 
according  to  the  actual  returns,  more  than  forty-seven  millions,  and  such  was 
the  result.  The  policy  of  constructing  the  works  and  parts  of  works  simul- 
taneously was  so  well  pursued,  that  no  considerable  portion  of  any  work  was 
completed  or  fit  for  use.  Twenty  miles  of  the  Madison  Railroad,  thirty  miles 
of  the  White  Water  Canal,  were  the  principal  routes  of  travel  that  had  been 
made  ready  ;  the  system  lay  in  fragments  throughout  a  State  whose  vast  territory 
of  woodland,  was,  as  yet,  but  slightly  interspersed  with  patches  of  cultivation. 
There  lies  the  system  still — its  unfinished  excavations  and  embankments,  locks, 
culverts,  aqueducts,  and  bridges  hastening  to  ruin  ;  the  income  insufficient  to 
pay  the  expenses  of  superintendence  and  repair.  The  Wabash  and  Erie  Canal 
may  be  ready  for  navigation  next  fall,  but  conceding  as  much  revenue  to  the 
work  as  was  derived  from  similar  portions  of  the  Ohio  Canal,  it  will  not  yield 
in  five  years  more  than  expenses  and  repairs," — The  Louisville  yournal,  61 
Niles,  229  (Dec,  1841). 

'67  Niles,  371  (Feb.,  1845).  Florida  had  to  be  added  to  this  list  two  or 
three  years  later. — 73  Niles,  218. 

^  "  As  an  actual  fact  it  will  be  seen  that  in  two  thirds  of  the  cases  the  State 
funds  have  not  been  judiciously  or  carefully  used,  and  that  the  consequence  has 
been  a  loss  of  the  money  furnished  and  no  corresponding  benefit,  by  reason  of 
the  development  of  material  resources," — Hunt,  134. 


SURPLUS  REVENUE.  I3I 

requirement  that  all  works  should  begin  simultaneously,  the  fatuous 
hopes  that  in  some  way  or  other  the  improvements  would  cost  the 
State  nothing  and  would  pay  for  themselves,  and  the  reckless 
action  of  all  parties  concerned, — it  seems  right  to  say  that  the  spirit 
was  a  spirit  of  gambling. 

There  was  the  same  kind  of  excitement,  and,  with  a  few  ex- 
ceptions, equally  disastrous  consequences  followed. 

Apart  from  these  considerations  there  is  another  reason  for  the 
misfortunes  of  the  AVestern  States.  The  chief  lack  of  new  communi- 
ties is  always  capital,  but  the  chief  requisite  for  the  prosecution 
of  internal  improvements,  is  abundant  and  cheap  capital.  This 
fact  at  once  accounts  for  the  enviable  success  of  Holland  in  mak- 
ing internal  improvements,  and  for  the  pitiable  failure  of  the 
frontier  States  fifty  years  ago.  Holland  is  old,  well-peopled,  and 
rich,  while  the  Western  States  were  barely  out  of  their  primitive 
condition  ;  in  Holland  surplus  capital  and  surplus  labor  are  em- 
ployed, in  the  West  recourse  was  had  to  borrowed  capital  and 
laborers  taken  from  the  needful  cultivation  of  the  soil.  Illinois 
in  1837,  with  about  three  fifths  the  present  population  of  the  single 
province  of  North  Holland,  possessed  a  territory  over  fifty  times 
as  great.  In  other  words,  the  ratio  of  the  density  of  population 
was  as  eighty  to  one,  in  favor  of  North  Holland.  It  is  remarked 
that  of  the  less  than  half  a  million  inhabitants  of  Illinois  in  1840, 
probably  less  than  70,000  were  taxpayers. 

"  The  mass  of  the  people,"  said  an  observer  at  the  time,  "  live 
in  the  first  rude  log-house  which  was  thrown  up  to  protect  them 
from  the  weather."  '  All  their  capital  had  been  laid  out  in  land,' 
and  the  population  was  sparse.  With  a  trading  capital  estimated 
at  $2,500,000  '  (that  of  New  York  was  about  |roo,ooo,ooo),  the 
people  of  Illinois  expended  on  internal  improvements  between 
$10,000,000  and  $15,000,000  in  a  few  years.  Under  these  circum- 
stances it  is  easy  to  see  that  the  results  which  followed  the  transfer 
of  laborers  from  productive  to  unproductive  employment,  and  of 
borrowing  capital  to  do  so,  were  inevitable  ;  the  candle  was  burn- 
ing at  both  ends,  and  each  moment  the  flame  burned  more  fiercely. 

'  W.  S,  Wait  in  BickneWs  Reporter,  Oct  30,  1841  ;    61  Niles,  243. 


132  SURPLUS  REVENUE. 

The  rapid  growth  of  the  surplus  gave  foreign  investors  great  con- 
fidence ;  the  States  wanted  to  borrow  for  internal  improvements  ; 
to  carry  on  these  works  men  were  drawn  from  the  life-support- 
ing industries  ;  this  led  to  an  increase  in  the  imports  and  there- 
fore of  the  surplus,  this  to  greater  confidence  and  easier 
loans,  this  to  more  undertakings  and  more  subtractions  of  labor 
from  the  productive  employment,  and  so  it  went  on  till  the  crash 
came. 

The  key  to  the  situation  is  easy  to  seize. 

There  was  a  large  fixation  of  capital,  when  the  country  needed 
a  large  production  of  capital  and  that  it  was  borrowed  capital, 
which  was  transformed  into  fixed  capital,  or  more  truly,  sunk,  just 
hastened  the  ruin  so  much  more. 

Simultaneously  with  the  sudden  expansion  of  the  internal  im- 
provement movement  came  the  distribution  of  the  surplus  to 
aggravate  the  evil.  Despite  the  facility  with  which  the  States 
could  borrow  money  in  the  earlier  part  of  the  excitement,  the  re- 
ceipt of  a  large  amount  of  capital,  which  they  believed  would  not 
be  recalled,  undoubtedly  impelled  them  to  greater  undertakings, 
and  added  fuel  to  a  flame  already  burning  too  fiercely. 

That  this  influence  of  the  distribution  was  in  most  cases  ex- 
tremely hurtful  can  hardly  be  questioned.  The  States  were  at- 
tempting, or  in  the  mood  to  attempt,  far  too  much,  and  the  distribu- 
tion, by  enticing  them  on  with  aid  for  the  present,  and  with  hopes  of 
more  in  the  future,'  not  merely  increased  the  scale  of  the  works 
but  also,  by  so  doing,  greatly  enhanced  their  cost.  Since  every 
additional  laborer  taken  from  agriculture  raised  the  price  of  pro- 
visions, and  every  additional  demand  for  labor  raised  wages,  it 
was  inevitable  that  every  new  undertaking  was  more  expensive 
than  the  last,  and,  furthermore,  increased  the  cost  of  all  other  un- 

'  Sec.  Woodbury,  in  his  Treasury  Report  in  1839,  notes  the  greatly  increased 
foreign  liabilities  of  the  States,  and  the  large  excess  of  exports  over  imports 
needed  to  settle  these  liabilities,  and  says  that  the  rapid  development  of  this 
state  of  affairs  was  "  accelerated  by  the  distribution  of  the  surplus  in  deposit 
among  the  States,  tempting  them  in  several  instances  to  new  and  unprofitable 
enterprises,  and  stimulating  delusive  hopes  of  still  further  distributions." — 57 
Niles,  294. 


SURPLUS  REVENUE.  I  33 

finished  improvements/  In  Pennsylvania  the  receipt  of  the  sur- 
plus was  followed  by  the  passing  of  a  bill  appropriating  $3,000,000 
to  internal  improvements.  Gov.  Ritner,  in  vetoing  this  bill,  asserted 
that  "the  bare  probability  of  the  passage  of  the  bill  had  already 
unsettled  the  condition  of  whole  sections  of  the  State,  and  had 
given  a  new  stimulus  to  the  over-excited  spirit  of  speculation."" 
This  bill  was  regarded  by  some  as  a  distribution  of  the  surplus,' 
for  no  special  disposition  had  been  made  of  the  money. 

As  most  of  the  capital  for  improvements  was  borrowed,  the  in- 
creasing cost  of  the  work  failed  to  make  itself  felt  as  a  brake. 
When  the  surplus  came,  practically  a  gift,  the  case  was  aggravated 
in  its  worst  features,  and  prudence  and  economy  forgotten.* 

Five  years  after  the  distribution,  Governor  Thomas  reviewed 
the  effects  of  that  measure  in  the  following  language  :  "  Nothing 
has  influenced  more  fatally  the  evil  councils,  by  which  so  many  of 
the  States  have  become  involved,  than  the  delusive  expectations, 
rekindled  constantly  as  fast  as  they  are  quenched,  of  pecuniary 
largesses  from  the  national  treasury  for  State  purposes.  The  dis- 
tribution law  (miscalled  the  deposit  act),  which  beggared  the  Gen- 
eral Government,  whilst  but  few  of  the  recipients  of  its  bounties 
have  been  enriched,  caused  a  most  unfortunate  revolution  in  pub- 
lic feeling,  if  not  in  public  opinion.  The  possession  of  that  fund, 
stimulating  as  it  did  the  wildest  speculations,  destroyed  at  once  all 
those  salutary  restraints  found  in  the  habits  of  the  people  and  the 
conditions  and  powers  of  their  local  governments.  An  inexhausti- 
ble fountain  of  wealth,  it  was  believed,  had  been  opened,  which 
was  to  flow  in  perennial  streams  into  the  State  treasuries.     State 

'  "  In  consequence  of  the  rise  in  the  price  of  labor  and  provisions  within  the 
last  two  years,  and  of  the  amount  of  work  commenced  in  the  other  States,  the 
expense  of  constructing  public  improvements  has  increased  fully  50  per  cent." 
— Gov.  Ritner  in  his  veto  of  the  above-mentioned  bill  (April  3,  1837)  ;  52  Niles, 
105.  ^  Ibid.  ^  Ibid.,  lot. 

^  "  The  moment  the  States  yield  to  this  tempting  influence,  their  indepen- 
dence and  sovereignty  will  be  at  an  end.  The  privilege  of  expending  the  reve- 
nue, without  any  of  the  responsibilities  which  its  collection  imposes,  will  destroy 
every  principle  of  moderation  and  economy." — Governor  Carlin,  of  Illinois,  in 
discussing  the  distribution  of  1842  ;   63  Niles,  300. 


134  SURPLUS  REVENUE. 

legislators,  it  was  thought,  were  no  longer  to  be  limited  in  their 
operations,  or  abridged  in  their  expenditures,  by  the  amount  of 
revenue  they  might  be  emboldened  to  take  directly  by  taxes  from 
the  pockets  of  the  people.  A  new  source  of  supply  was  to 
was  to  come  through  the  breach  made  in  the  Federal  Constitution. 
Private  property  was  to  be  obtained  for  public  purposes,  by  a  less 
perceptible,  because  more  circuitous,  route.  High  tariffs  were  to 
be  levied  to  supply  not  only  the  demands  of  the  national  treasury 
but,  in  conjunction  with  the  land  sales,  to  furnish  a  surplus  for 
distribution  after  that  deposited  was  exhausted.  Under  the  in- 
fluence of  these  and  similar  delusions,  the  large  and  oppressive 
debt  of  Maryland  has  been  contracted."  * 

With  these  words  of  Governor  Thomas  may  be  left  the  brief 
consideration  of  the  effects  of  the  distribution.  As  a  discussion 
of  the  economic  arguments  for  and  against  distributing  the  surplus 
revenue  falls  outside  the  range  of  this  work,  which  is  intended 
merely  as  an  historical  investigation,  I  have  only  to  present  a  word 
or  two  in  reference  to  the  proper  relation  of  the  law  of  June  23, 
1836,  to  the  present  schemes  of  distribution,  and  my  work  will  be 
done. 

The  act  of  1836  was  designed  to  relieve  the  overburdened  Treas- 
ury when  the  public  money,  as  it  was  then  deposited,  was  doing  a 
vast  deal  of  mischief  ;  an  immediate  remedy  was  sought  for  a  finan- 
cial plethora  ;  at  the  present  day,  however,  there  is  no  such  press- 
ing necessity,  and  the  sole  aim  of  the  distributionists  is  to  per- 
petuate a  high  protective  tariff.  Whether  the  design  be  laudable 
or  not,  that  is  unquestionably  the  fact. 

There  is,  then,  difference  enough  in  the  underlying  causes  to 
decrease  the  value  of  the  precedent  which,  it  is  claimed,  the  act 
of  1836  offers  to  the  later  projects,  but  when  the  legal  character  of 
that  act  is  compared  with  the  propositions  that  have  been  lately 
advanced,  the  assumption  that  the  former  is  a  precedent  for  the 
latter  is  wholly  unwarranted.  In  its  legal  character  the  law  of 
June  23,  1836,  was  simply  a  bill  regulating  the  Government  de- 

^  Message  of  Governor  Thomas,  of  Maryland,  December  27,  1842. — 63  Niles, 
315- 


SURPLUS  REVENUE.  I  35 

posits.  The  wideness  of  the  gulf  between  the  modern  plans  and 
their  supposed  precedent  appears  in  a  striking  light  when  we  see 
the  two  strongest  supporters  of  the  deposit  bill  emphatically  de- 
nouncing the  collection  of  taxes  for  distribution. 

Daniel  Webster  in  his  speech  of  May  31,  1836,  "  On  the  distri- 
bution of  the  surplus  revenue,"  while  favoring  a  distribution  in 
that  crisis,  said  :  "  There  would  be  insuperable  objections,  in 
my  opinion,  to  a  settled  practice  of  distributing  revenue  among 
the  States.  It  would  be  a  strange  operation  of  things,  and  its 
effects  on  our  system  of  government  might  well  be  feared.  I  can- 
not reconcile  myself  to  the  spectacle  of  the  States  receiving  their 
revenues,  their  means  even  of  supporting  their  own  government, 
from  the  Treasury  of  the  United  States."  Further  on,  Mr.  Web- 
ster approved  of  the  continued  distribution  of  the  proceeds  of  the 
public-land  sales,  if  a  separate  account  were  kept  of  them  ;  "  but," 
he  continues,  "  if  we  cannot  separate  the  proceeds  of  the  lands  from 
other  revenue,  if  all  must  go  into  the  treasury  together,  and  there 
remain  together,  then  I  have  no  hesitation  in  declaring  now  that  the 
income  from  customs  must  be  reduced.  It  must  be  reduced  even  at 
the  hazard  of  injury  to  some  branches  of  manufacturing  industry  ; 
because  this,  in  my  opinion,  would  be  a  less  evil  than  that 
extraordinary  and  dangerous  state  of  things  in  which  the  United 
States  should  be  found  laying  and  collecting  taxes  for  the  purpose 
of  distributing  them."  * 

A  few  years  later  Henry  Clay,  when  discussing  the  constitutional 
power  of  the  Government  to  tax,  declared  :  "  There  is,  then,  I  re- 
peat, no  power  or  authority  in  the  General  Government  to  lay 
and  collect  taxes  in  order  to  distribute  the  proceeds  among  the 
States.  Such  a  financial  project,  if  any  administration  were 
mad  enough  to  adopt  it,  would  be  a  flagrant  usurpation."" 

With  these  two  opinions,  coming  from  the  highest  sources, 
"sharply  implying  the  wide  and  essential  difference  between  the 
"  distribution  in  1837  "  and  the  late  propositions,  the  history 
of  that  incident  may  fitly  close. 

'  7  Webster,  257. 

'  6  Clay's  Works,  233. 


APPENDICES. 


APPENDIX  I. 

A  supplement  to  "  Examiner's"  views,  mentioned  on  page  i6.  The  attempt 
is  simply  to  calculate  what  would  have  been  the  excess  of  receipts  over  ex- 
penditures of  the  Government  if  there  had  been  no  fever  of  speculation. 

ANNUAL   RECEIPTS   FROM   LAND   SALES. 

Average  for  ten  years  before   1835         .....  $2,363,004 

after  1S36 3,171,167 

2)5.534.171 
Average  for  twenty  years  excluding  the  speculative  period      .  $2,767,085 

The  sales  of  1835  amounted  to $14,757,600.75 

2,767,085.00 


By  subtracting  the  average  yearly  receipts  we  find  the  specu- 
lative excess  for  1835 $11,990,515.75 

The  sales  of  1836  amounted  to      .         .         .         .         .         .      $24,877,179.86 

2,767,085.00 


Going  over  the  same  process,  we  find  the  speculative  excess 

to  be $22,110,094.86 

11,990,515.75 


We  now  find  that  the  receipts  of  1835  and  1836  exceed  the 

annual  average  for  twenty  years  by         ...  .       $34,100,610.61 

This  excess  of  $34.1  million,  though  calculated  from  the  average  of  twenty 
years,  is  probably  a  little  too  large.  The  time  during  which  the  average  is 
calculated  included,  before  1835,  several  years  when  credit  was  not  given  on  the 
sales,  and  after  1836  several  years  of  depression. 

Now  as  the  receipts  of  1834  were  $4.9  million,  and  of  1837  $6.8  million,  ap- 
proximately, it  will  be  fair  enough  to  assume  that  the   normal  receipts   of  1835 
would  have  been  about    ........         $5.5  million 

And  for  1836  ..........  6.    million. 

Then  we  have  the  estimated  normal  receipts  for  1835  and  1836,     $11.5  million. 

137 


138  SURPLUS  REVENUE. 

Actual  receipts  for  1835  and  1836 $39,634,780.55 

"•5 


Estimated   speculative    increase    for   those    years,    consisting 

largely  of  bank  credits     .......     $28.1 

In  the  general  account  of  the  Government  we  have  : 

RECEIPTS,   EXCLUDING   LOANS.  EXPENDITURES,  EXCLUDING   INTEREST. 

1834,  $21.8  million.  1834,  $18.4  million. 

1835,  35.4       "  1835,     17.5       " 

1836,  50.8       "  1836,     30.9       " 


$108.0       "  $66.8 

66.8 


$41.2       "     =   the  excess  of  receipts  over  expenditures  in 
those  three  years. 

$41.2  million,  excess  of  general  receipts. 
28.1      '"        Speculative  excess  of  land  receipts. 


513. 1       "  =  Approximately   the    surplus,  excluding   abnormal   land    receipts. 
3,         "        But  the  speculative  spirit  caused  unusually  large  importations  to 
be  made,  and  thereby  increased  the  customs.     Three  million  dol- 


$10.1  "  lars  may  be  assumed  as  the  amount  of  this  abnormal  excess 
though  it  was  probably  near  five  millions.  Our  result  is  that  under  ordinary 
circumstances  there  would  have  been  a  surplus  Jan.  i,  1837,  of  about  $10,000,- 
000  instead  of  $41,000,000.  There  is  only  one  further  modification  to  be 
made.  The  presence  of  the  surplus  notably  increased  Congressional  expendi- 
tures during  1836,  so  that  about  the  excess  of  receipts  was  somewhat  too  small. 
But  making  all  the  necessary  allowances,  the  figures  show  that  if  the  deposits 
had  not  been  removed  to  excite  the  speculation,  and  if  the  speculation  had  not 
been  excited  in  some  other  way,  there  never  would  have  been  anywhere  near  as 
large  a  surplus. 


APPENDIX    II. 

TABLES. 

TABLE    I.       See  p.  38. 

Statement  of  amount  on  deposit  in  the  N.  Y.  banks  to  the  credit  of  the 
Government,  Jan.  i,  1837,  also  the  same  April  26th,  and  the  amounts  credited 
to  the  State  April  26th.  By  subtracting  the  sum  of  the  last  two  columns  from 
the  first,  we  eet  as  a  remainder  the  amount  of  Government  funds  withdrawn 
from  New  York  in  less  than  four  months. 


Manhattan  Company 
National  Bank 
Phenix  Bank    .... 
Mechanics'  Bank       .     . 
Merchants'  Bank 
Leather  Manuf.  Bank    . 
Bank  State  of  New  York 
Lafayette  Bank    .     .     . 
Dry  Dock  Bank    .     .     . 
Tradesman's  Bank     . 
Merchants'  Ex.  Bank     . 
Seventh  Ward  Bank 
Union  Bank     .... 
Bank  of  America 


Jan.  1st, 
Government. 

$2,143,325.78 

320,000.00 

1,089,160.00 

3-739.050.00 

728,880.00 

450.00 

345,000.00 
150,000.00 
201,000.00 
380,000.00 
375,000.00 
709,634.29 
2,664,017.73 

$12,294,067.80 


April  26th, 
Governinent. 

$770,577-76 
170,000.00 
170,795.00 

1,000,000.00 
346,100.02 
200,089.27 

134,000.00 

80,000.00 

94,676.92 

50,498,21 

149,813.57 

248,634.20 

1,267,624.00 

$4,066,210.74 
1,358,003.10 

$6,125,213.14 


April  26th, 

State. 
$206,005.96 

180,000.00 

205,000.00 

65,000.00 

325,000.00 

50,900.00 

106,347.14 
210,000.00 

&i, 358, 003. 10' 


Amount    withdrawn     from      6,125,213.14 

New   York   in   less   than     

four  months       .     .     .     .$6,168,854.66 

This  item  to  the  credit  of  the  State  is  only  a  trifle  larger  than  one  instalment. 

TABLE    IL     See  p.  40. 

The  table  (taken  from  Mr.  John  Quincy  Adams'  speech  "  upon  nouns,  pro- 
nouns, and  adjectives,"  53  Niles,  167)  shows  the  amount  due  each  State  on  Oct. 

'  52  Niles,  227. 


139 


140 


SURPLUS  REVENUE. 


r,  1837,  the  actual  deposits  in  the  deposit  banks  of  each  State  in  July  and 
August,  1837,  to  meet  the  general  call  for  the  payment  of  this  fourth  instalment, 
the  number  of  deposit  banks  in  July  and  on  Oct.  4,  1837,  and  the  balances  still 
due  Oct.  4,  1837.  From  this  table  it  may  be  seen  how  great  the  deposits  were 
in  the  States  where  the  land  sales  occurred,  and  how  almost  completely  unavail- 
able that  part  of  the  surplus  was. 


1 

No.    of 

Deposits  due  to  the  several  States  on  tlie 

No.  of  dap.  banks  and 
actual  denosits    lulv 

deposit 
banks 

Balances  still 

first  of  Oct.,  1837. 

and  . 

A.ugust,  1837. 

Oct.  4, 

i8?7. 

due  Oct.  4,  1837 

Maine $318,612 

5 

$117,042 

3 

$41,708 

New  Hampshire 

223,028 

6 

114,026 

5 

63,635 

Massachusetts 

446,057 

4 

81,278 

4 

42,891 

Rhode  Island 

127,445 

2 

5,433 

2 

l,X33 

Vermont 

223,028 

2 

588 

2 

466 

Connecticut 

254,890 

2 

31,629 

3 

7,409 

New  York 

1,338.173 

15 

1,386,919 

14 

803,570 

New  Jersey 

254,890 

3 

95.506 

3 

37,292 

Pennsylvania 

955. S38 

2 

255.445 

3 

131,857 

Delaware     . 

95.583 

I 

2,906 

I 

2,906 

Maryland     . 

318,612 

2 

280,198 

2 

212,102 

Virginia 

732,809 

4 

403,136 

3 

739,302 

North  Carolina 

477,919 

I 

146,030 

I 

64,638 

South  Carolina 

350,474 

2 

111,590 

2 

125,433 

Georgia 

350,474 

3 

172,269 
1,020,856 

3 

119,706 

Alabama 

223,028 

I 

I 

906,379 

Mississippi 

127,445 

2 

1,744,373 

2 

1,656,367 

Louisiana    . 

159.306 

2 

1,450,023 

2 

918,749 

Missouri 

127,445 

I 

589.327 

2 

355,280 

Kentucky    . 

477,919 

4 

843,246 

4 

845,053 

Tennessee   . 

477.919 

2 

514.516 

2 

182,932 

Ohio        ,     . 

669,086 

8 

1,127,979 

8 

960,061 

Indiana 

286,751 

5 

743,129 

5 

660,723 

Illinois    . 

159,306 

I 

39,795 

I 

39.323 

Arkansas 

95.583 

Michigan     . 

95,583 

2 

998,050 

2 

882,994 

$9,367,214 

$12,275,302 

$9,801,921 

These  very  suggestive  figures  Adams  analyzed  and  commented  upon  at  con- 
siderable length  with  great  vigor.  There  is  room  to  quote  only  one  or  two  para- 
graphs. 

"  The  balances  due,  therefore,  from  the  deposit  banks,  in  the  single  State  of 
Mississippi,  a  State  with  four  electoral  votes,  are  nearly  one  hundred  thousand 
dollars  more  than  adequate  to  pay  the  whole  fourth  instalment  receivable  by  her- 
self, and  by  the  six  New  England  States." 

"  But  observe  that,  through  the  whole  of  September,  although  the  deposit  act 
of  23d  June,  1836,  was  in  full  force,  the  Secretary  of  the  Treasury  continued  to 


SURPLUS  REVENUE.  I4I 

draw  from  the  banks  of  the  North  to  the  amount  of  more  than  eight  hundred 
thousand  dollars  of  those  balances,  which  ought  to  have  been  applied  toward  the 
payment  of  the  fourth  instalment  to  the  States  of  the  North  ;  while,  at  the  same 
time,  he  left  in  the  Southwest  and  Western  States  nearly  seven  millions  and  a 
half,  nearly  five  millions  more  than  the  fourth  instalment,  which  they  were  en- 
tilled  to  receive." 

A  considerable  portion  of  these  unavailable  deposits  remained  unpaid  for  a 
long  time. 

The  Treasury  Report,  Dec,  1838,  mentioned  the  following  "  funds,  not  im- 
mediately available,  in  the  Treasury  "  : 

($28,101,644.97  deposited  with  the  States.) 

$1,100,000  "  due  chiefly  from  various  insolvent  banks,  on  account  of  money 
that  before  1837  had  been  placed  in  their  custody  to  the  credit  of  the  Treasurer, 
and  still  remains  unpaid." 

$2,400,000  "due  from  banks  that  suspended  specie  payments  in  1837,  and 
will  probably  not  be  paid  during  the  present  year." — 55  Niles,  242. 

TABLE  III. 

Illustrating  tJie  Great   Arbitrary   Movements   of  Money   In  the 

Months  Before  the  Crisis. 

This  table  shows  the  amounts  that  each  State  received  (ist  col.),  the  amounts 
on  deposit,  June  20,  1836  (2d  col.),  and  Dec,  19,  1836  (3d  col.),  and  the  pos- 
sible or  the  necessary  transfers  of  money  to  or  from  each  State  between  Dec. 
19,  1836,  and  July,  1 837,  in  order  that  the  first  three  instalments  might  be  paid 
(4th  col.),  (transfers  to  or  necessary  transfers  are  marked  plus,  and  transfers 
from  or  possible  transfers,  i.  e.,  the  excess  over  the  requirements  of  the  first 
three  instalments  in  the  given  State,  mi7tus).  A  comparison  of  cols.  2  and  3 
shows,  of  course,  the  transfers  that  took  place  between  June  20th  and  Dec. 
19th.  Col.  5  shows  the  transfers  that  took  place  before  July  or  Aug.,  1837. 
The  arrangement  of  the  States  is  by  their  position,  so  far  as  possible,  so  as  to 
show  the  magnitude  of  the  transfer  in  general. 

'  These  figures  are  found  by  adding  to  or  substracting  from  the  figures  in 
col.  4  the  sums  on  deposit  in  the  respective  States  in  July,  1837,  e.  g.,  $448,- 
234.25  had  to  be  transferred  to  Maine  to  distribute  the  first  three  instalments  ; 
but  in  July  there  is  still  $117,042  on  deposit  in  Maine.  These  sums  added 
together  give  approximately  the  actual  transfers  to  Maine.  In  States  possess- 
ing ports  of  entry  and  land  offices,  the  account  would  be  modified  somewhat, 
but  this  influence  would  generally  balance  itself.  I  say  "  at  least"  because  if 
the  banks  of  Maine  did  not  pay  up  promptly,  their  deficiency  would  have  to  be 
supplied  from  other  States.     This  was  probably  the  case  in  Tennessee,  for  in- 


142 


SURPLUS  REVENUE. 


States. 


Am't  de- 
posited with 
the  States. — 
Col.  1. 


Am't.  on 

deposit  in 

the  banlcs 

of  the 

States, 

June  20, 

1836.— 

Col.  2. 


Amt.    on 

deposit  in 

the  banlcs 

of  the 

States, 

Dec.    19, 

1836.— 

C6l.  3- 


The  necessary 
transfer  to,  or  pos- 
sible transfer 
from,  before  July, 
i837.-Col.  4 


The  actual  trans- 
fer between  Dec. 
19,  1836,  and  July, 
1837,  was  at 
least.^— Col.  s. 


Maine    . 
New  Hampshire 
Vermont     . 
Massachusetts 
Rhode  Island . 
Connecticut     . 
New  York . 
New  Jersey     . 
Pennsylvania  . 
Delaware    . 
Maryland    . 
Virginia 
North  Carolina 
South  Carolina 
Georgia 
Alabama     . 
Mississippi 
Louisiana  . 
Tennessee . 
Kentucky  . 
Ohio      .     .     . 
Indiana 
Illinois  . 
Missouri     .     . 
Arkansas    . 
Michigan    . 


$955,838. 

66g,oS6. 

66g,oS6. 
1,338,173- 

382,335. 

764,670. 
4,014,520. 

764,679. 
2,867,514. 

286,751. 

955,838. 
2,198,427. 

1,433,757. 
1,051,422. 
1,051,422. 

669,086. 

382,335. 

477,919. 
1, 433, 757. 
1,433,757. 
2,077,260. 

860,254. 

477,919. 

382,335. 

286,751. 

286,751. 


25 
79 
79 
57 
30 
60 

71 
60 

78 
49 
25 
94 

39 
09 
09 

79 
30 
14 
39 
39 
■34; 

44' 

^4| 
30 

49 
49 


%    231,829 
180,200 

52,975 

2,077,164 

112,084 

103,839 

12,108,322 

None. 
2,643,179 
None. 
1,447,663 

489,951 

129,625 

484,680 

637,011 

1,057,740 

1,619,564 

2,568,355 

631,289 

400,037 

1,520,979 

1,021,195 

None. 
1,890,304 

None. 
1,895,175 


$    507,604 

632,285 

162,315 

2,386,476 

349,758 

741,063 

11,536,271 

534,004 

2,684,880 

170,000 

1,225,210 

1,238,660 

660,697 

936,576 

558,904 

1,407,505 

1,791,558 

4,382,308 

492,433 
1,802,846 
3,130,881 
2,136,419 
45,616 
1,880,628 

None. 
1,462,222 


+  $448,234.25 
+       36,801.79 

+     506,771.79 

—  1,048,302.42 

+  32,577-30 

+  23,670.60 
-7,521,750.29 

4-  230,675.60 

+  282,634.78 

+  116,751.49 

—  269,371.75 

+  959,767.94 

+  773,060.39 

+  114,846.09 

+  492,518.09 

—  738,418.21^ 

—  1,409,222.70 
-3,904,388.86 

+  941,324.39 

—  369,088.61 

—  1,053,620.66 

—  1,276,164.54 
-I-  432,303.14 

—  1,498,292.70 
+  286,751.49 
-1,175,470.51 


+  $565,276.25 
+      150,827.79 

+      507,359-79 

—  962,024.42 
4-  38,010.30 
+  55,299.60 
-6,134,831.29 
+  267,967.60 
+  538,079.78 
4-  119,657.49 
+  10,822.25* 
+  1,362,903.94 
+  929,090.39 
+  225,436.09 
4-  664,787.09 
+  167,960.79'' 
-h  247,144.30 
-2,454,365.86 

4-1,455,840.39 

4-  474,157-39 

+  76,358.34 

-  533,045.54 
+  472,098.14 

—  908,965.70 
4-  286,751.49 

-  187,420.51 


'  (The  note  begins  on  the  previous  page.) 
stance,  for  only  $941,324.39  was  required  from  abroad  to  complete  the  three  in- 
stalments, while  $1,455,840.39  was  sent  in,  more  than  enough  to  pay  all  four 
instalments,  whence  it  would  appear  that  none  of  the  $492,433  (in  col.  3)  had 
been  available.  The  excess  of  the  figure  in  col.  5  over  the  three  instalments, 
if  added  to  the  $492,433,  makes  a  sum  nearly  equal  to  the  deposits  in  the 
Tennessee  banks,  July,  1837.     See  Table  II.  above. 

"Where  a  plus  figure  in  col.  5  follows  a  minus  in  col.  4,  it  shows  that  the 
given  State,  though  containing  deposits  in  its  banks  in  excess  of  its  share  of 
the  surplus,  found  it  impossible  to  collect  these  deposits.  Miss,  and  Ohio  are 
good  instances  of  this  state  of  affairs.  It  is  to  be  noted  that  New  York  fur- 
nished about  three  fifths  of  the  amount  transferred  to  other  States.  (This  table 
was  constructed  from  the  data  of  the  one  in  Niles  51,  306,  and  the  one  quoted 
from  Niles  53,  169.) 


SURPLUS  REVENUE. 


143 


TABLE  IV. 

The  surplus  was  divided  among  the  States  according  to  their  electoral  vote, 

or  on  the  basis  of  direct  taxation.     But  since   the  electoral  vote  of  each  State 

in  1837  was  based  upon  the  census  of  1830,  -i. per  capita  division  of  each  State's 

share  according  to  the  census  of  1830  will  very  strikingly  show  the  great  gain  of 


d 

Am't.  to 

0 

Atn't   to 

each  free 

States. 

"3 
0 

The  share  received 
by  each  State. 

each  free 
person 
(census 

person 

(estimated 

popula- 

, 

0 

5 

of  1830). 

tion, 
1837).' 

Alabama 

7 

$669,086.79 

$3.48 

$2.28 

Arkansas 

3 

286,751.49^ 

II. II 

4-57 

Connecticut 

8 

764,670.60 

2-57 

2.50 

Delaware 

3 

286,751.49- 

3-90 

3.82 

Georgia 

II 

1,051,422.09 

3-50 

2.55 

Illinois 

5 

477,919.14 

3-04 

1.49 

Indiana 

9 

860,254.44 

2.51 

1.48 

Kentucky     . 

15 

1,433,757-39 

2.74 

2.22 

Louisiana     . 

5 

477,919.14 

4.50 

2.98 

Maine 

10 

955.83S.25 

2-39 

2.02 

Maryland     . 

10 

955,838.25 

2.77 

2.54 

Massachusetts 

14 

1,338,173.5s 

2.19 

1.91 

Michigan 

3 

286,751.49-. 

9.07 

1.63' 

Mississippi  . 

4 

382,335.30 

5.39 

2.59 

Missouri 

4 

382,335-30 

3.31 

1.99 

New  Hampshire 

7 

669,086.79 

2.49 

2.39 

New  Jersey 

8 

764,679.60 

2.40 

2.15 

New  York    . 

42 

4,014,520.71 

2.09 

1.76 

North  Carolina 

15 

1,433,757-39 

2.91 

2.85 

Ohio    . 

21 

2,077,260.34 

2.21 

1-54 

Pennsylvania 

30 

2,867,514.78 

2.13 

1-77 

Rhode  Island 

4 

382,335.30 

3-93 

3-73 

South  Carolina 

II 

1,051,422.09 

3-96 

3-94 

Tennessee    . 

15 

1,433.757.39 

2.65 

2.32 

Vermont 

7 

669,086.79 

2.38 

2.33 

Virginia 

23 

2,198,427.94 

2.96 

2.81 

'  The  estimated  population  of  1837  has  been  obtained  by  adding  seven  tenths 
{-^  of  the  increase  of  free  persons  in  the  years  1830-40  to  the  number  of  free 
persons  in  1830.  I  have  used  in  the  calculation  the  free  population,  at  con- 
siderable trouble,  to  show  the  gain  of  the  slave-holding  States  from  their  slave 
representation,  a  gain  not  offset  at  that  time  by  any  direct  taxation  worth  men- 
tioning. At  this  time,  by  act  of  Congress,  1832,  one  representative  was  returned 
for  every  47,700  of  representative  population. 

''Calculated  on  the  Michigan  census  of  1837. 


144  SURPLUS  REVENUE. 

the  sparsely  populated  States  by  such  a  ratio  of  division.  This  division  is 
found  in  the  first  of  the  subjoined  columns,  while  the  second  shovk^s  the  changes 
in  the  per  capita  shares  wrought  by  the  increase  of  population. 

It  may  be  noted  that  Michigan's  share  per  capita  decreased  the  most  with  the 
increase  of  population,  and  that  South  Carolina's  decreased  the  least.  These 
tables  are  also  highly  interesting  as  showing  the  inequality  of  the  burdens  that 
would  have  fallen  upon  the  States  in  case  an  expensive  foreign  war  had  neces- 
sitated at  that  time  heavy  direct  taxation.  In  1837,  if  $28,101,644.91  had  been 
raised  by  direct  taxation  rich  New  York,  would  have  contributed  $1.76  per  free 
person,  and  poor  wild  Arkansas  $4.57  per  free  person.  Under  the  same  circum- 
stances Massachusetts  would  have  contributed  $1.91,  and  Rhode  Island  $3.73. 
Of  course  the  offset  to  this  inequality  was  the  proportionately  larger  voice  that 
the  small  States  had  in  public  affairs. 


APPENDIX    III. 

A  list  of  the  towns  in  Massachusetts  that  appropriated  more  or  less  to  educa- 
tion from  the  surplus  revenue  during  the  years  1841  and  1846. 


Barnstable  Co 
Barnstable 
Eastham 
Falmouth 
Harwich 
Sandwich 
Wellfleet 

Berkshire  Co. 
Becket 
New  Ashford 
New  Marlborough 
Sheffield 
Tyringham 

Bristol  Co. 
Dighton 
Rehoboth 
Seekonk 

Dukes  Co. 
Tisbury 

Essex  Co. 
Dan  vers 
Georgetown 
Haverhill 
Newbury 

Franklin  Co. 
Montague 
Whately 

Hampden  Co. 
Palmer  . 
Springfield 
Tolland 
Wilbraham 


I84I 

1846 

$450.00 

$331.00 

75.00 

299.31 

100.00 

372.01 

112.50 

87.00 

129.52 

34-58 

204.78 

180.00 

180.00 

177.25 

167.25 

171.00 

171.00 

139.20 

242.00 

140.00 

276.60 

90.00 

299.00 

53T.I8 

3S2.50 

183.61 

168.06 

• 

150.00 

174.00 

936.51 

I06T.84 

84.60 

84.00 

235.59 

246.70 

145 


146 


SURPLUS  REVENUE. 


Hampshire  Co 
Cunnington 
Granby 
Hatfield 
Middlefield 
riainfield 
Southampton 
Worthington 

Middlesex  Co 
Ashby 
Bedford 
Billerica 
Brighton 
Dracut 
Holliston 
Lexington 
Lincoln 

Norfolk  Co. 
Bellingham 
Dover     . 
Needham 
Sharon 
Stoughton 
Wrentham 

Plymouth  Co. 
Duxbury 
Marshfield 
North  Bridgewater 
Plympton 

Worcester  Co. 
Douglas 
Mendon 
Uxbridge 

Total 


I84I 

1846 

$156.00 

$150.00 

100.00 

113.74 

90.00 

90.08 

II9.I3 

150.00 

146.98 

146.98 

40.00 

90.00 

90.00 

75.20 

58.93 

23.71 

180.00 

180.00 

60.00 

88.50 

140.62 

140.63 

52.50 

52.50 

60.00 

131.20 

131.20 

180.06 

180.00 

336.46 

341.84 

220.00 

228.00 

99.71 

91.71 

276.20 

42.80 

142.05 

415-29 

131.75 

247.00 

247.00 

$6,625.95      $8,392.99 


Examples  of  the  use  of  the  Surplus  in  other  towns. — During  my  in- 
vestigations of  this  subject  I  sent  out  about  forty  circulars  to  the  town  clerks  of 
the  chief  cities  and  towns  in  Massachusetts,  to  learn  how  much  was  received  by 
those  towns,  the  use  made  of  the  money,  whether  any  was  lost,  whether  it  had 
been  a  benefit,  whether  it  had  led  to  extravagance,  etc,  etc.  The  following  in- 
formation was  gained ; 


SURPLUS  REVENUE.  1 4/ 

Amherst  received  $5,491.01. — The  money  was  loaned  at  first  and  then  later 
$4,433.17  was  paid  for  a  farm,  and  $1,219.12  for  a  new  barn  thereon.  The 
farm  has  served  as  a  poor-farm  since.  In  18S2  the  buildings  were  burned,  but 
were  well  insured.  $408.37,  made  up  of  the  interest  and  the  residue  of  the 
principal,  was  used  for  town  expenses  in  1839  or  1S40.  The  surplus  has  been 
regarded  as  "  a  great  benefit."     None  of  it  has  been  lost. 

Andover  received  $9,707.40,  which  was  "aliased  in  paying  town  debts." 
It  was  a  benefit. 

Boston  received  $140,599.83. — The  money  was  used  for  city  expenses  in 
1838,  and  some  loans  authorized  by  the  city  council  were  not  negotiated,  as  the 
surplus  in  the  bank  drew  less  interest  for  the  city  than  would  have  been  paid 
for  a  loan.     (See  Auditor's  Rep.,  Dec,  1838.) 

Cambridge. — No  records  in  the  clerk's  office  state  the  amount  of  the  surplus 
falling  to  the  town.     The  money  was  put  in  the  town  treasury, 

Danvers. — Upon  the  division  of  the  town  in  1855  Danvers  received  about 
$4,500.  At  first  it  was  considered  a  liability  of  the  town,  and  the  income  was 
appropriated  to  schools.  In  1S59  the  "  liability"  theory  was  discarded  and  the 
money  considered  town  funds.  "  It  did  not  lead  to  any  unusual  or  extravagant 
expenditure." 

FiTCHBURG  received  $4,856.04,  and  the  money  was  used  to  pay  the  debt  of 
the  town.  The  city  treasurer  cannot  learn  that  the  money  led  to  any 
extravagance,  and  believes  it  was  a  great  benefit,  as  it  "lightened  the  public 
burdens  for  the  next  few  years,"  a  period  of  general  distress  in  business. 

Groton  received  $4,115. — "  Just  about  the  time  this  money  was  received  a 
heavily  loaded,  seven-horse  team,  driver  and  all,  fell  through  a  bridge  over  the 
Nashua  River,  causing  a  loss  or  damage  of  about  $3,000,  and  this  $4,115  was 
regarded  by  many  as  a  real  Godsend  to  meet  that  occasion,  though  the  money 
was  actually  used  by  the  town  to  pay  its  "interest-bearing  indebtedness." 
Certainly  a  benefit. 

Lee. — Amount  unknown  ;  used  partly  to  pay  off  the  town  debt  and  partly  for 
the  benefit  of  schools. 

Lynn  received  $14,897.00,  and  the  money  was  used  to  pay  the  town  debt. 

Nantucket  received  $16,255.45,  and  it  was  used  to  pay  the  debt  in  part. 
"  A  very  great  benefit." 

New  Bedford  received  $18,258.95. — The  money  was  "  expended  in  the 
erection  of  a  town  hall."  The  work  was  economically  done,  and  the  surplus 
was  a  benefit. 

Newburyport  received  $14,843. — The  money  was  loaned  to  the  State  till 
June  I,  1843,  when  $15,776.26,  credited  to  the  "  surplus  revenue,"  was  appro- 
priated for  public   improvements.     This  sum  probably   includes  the   original 


148 


SURPLUS  REVENUE. 


principal  and  the  accrued  interest.  $5,000  was  appropriated  to  the  school 
department,  and  was  used  mainly  for  repairs  and  new  buildings.  $348.75  was 
spent  for  globes  and  maps,  and  $500  for  philosophical  apparatus. 

$5,000  was  appropriated  for  the  fire  department,  and  the  residue  for  town  re- 
pairs. The  accounts  of  the  town  show  a  little  change  from  this  program,  as 
follows  : 

New  Brick  Barn  for  Poor  Dep't    .         .         .         $3,253.79 


Expended  on  Aims-House    . 
School  Dep't  and  Buildings 
Highways     .... 
Fire  Dep't    .... 

"       "     for  Reservoirs 
Public  Park  or  Mall  and  Pond 
Incidental  Expenses 


274-09  $3,527-88 
5.400.75 
1,565-37 


$1,870.03 
1.879-39 


3.749-42 

1,403-30 

129.54 


$15,776.26 
"  It  appears  from  the  above  statement  that  the  money  was  very  judiciously 
expended,  that  the  inhabitants  of  this  city  are  at  the  present  time  receiving 
benefits  from  the  surplus  revenue — having  in  possession  and  constant  use  the 
public  buildings  and  other  improvements  paid  for  by  said  revenue." 

Salem  received  $29,790.23,  which  was  "  appropriated  as  follows  : 
"  Payment  of  part  of  city  debt  ....  $8,000.00 
"  Repairs  on  building  occupied  by  insane  poor        .  600.00 

"  Erection  and  furnishing  of  City  Hall  .         .         21,190.13 

"$29,790.13" 

The  work  was  economically  done  and  was  a  benefit  to  tlae  town. 

Sandwich  received  "  about  $3,500. — It  was  loaned  to  individuals  ;  none  of  it 
was  lost.  In  the  year  1856  the  roads  of  the  town  were,  on  account  of  the  very 
unusual  fall  of  snow,  rendered  impassable,  again  and  again,  so  that  the  expenses 
of  clearing  amounted  to  that  sum  ; — the  town  in  consequence  voted  to  use  said 
revenue  to  pay  the  expense,  which  was  done.  I  presume  the  work  was  as 
economically  done  as  in  any  other  service  performed." 

Sheffield  received  $4,940,96. — It  was  loaned  on  the  security  of  "  individual 
names,  residents  of  the  town."     $700  is  now  "  missing." 

The  interest  was  appropriated  for  schools.  Later  the  principal  was  for  town 
purposes,  like  building  bridges.  The  work  is  thought  to  have  been  economically 
done,  and  was  "  without  question  "  a  benefit. 

Springfield  received  $15,764.00. — It  was  at  first  loaned  on  real-estate  mort- 
gages, and  the  interest  "applied  to  the  support  of  schools."  Later  the  principal 
was  applied  "  to  the  payment  of  the  town  debt."     "  Certainly  "  a  benefit. 

These  instances  are  good  examples  of  what  was  done  through  the  State  and 
in  New  Hampshire  as  well. 


APPENDIX   IV. 


The  appropriations  for  schools  made   from  the  ' '  Surplus   Revenue  "  by  the 
towns  in  New  Hampshire  during  four  years. 


1865-6. 

1868-9. 

1869-70. 

1870-1. 

Rockingham  Co. 

Brentwood       .... 
East  Kingston      .     .     . 

Epping 

Londonderry  .... 

Rye 

Salem 

Strafford  Co. 

Dover 

Farmington     .... 
Madbury 

Belknap  Co. 
Centre  Harbor     .     .     . 

Milton 

New  Durham  .... 
New  Hampton     . 

Carroll  Co. 

Brookfield 

Hart's  Location    .     . 
Moultonborough  . 

Sandwich 

Tamworth 

Tuftonborough     . 
Wakefield 

Merrimack  Co. 

Dunbarton 

Henniker 

Hopkinton       .... 
New  London  .... 

Hillsborough  Co. 

Amherst 

Bennington      .... 
Francestown    .... 

Hudson 

Litchfield 

36.09 

100.00 

50.00 

12.12 
60.00 

1-44 
14-30 

12.00 

■  13.98 
48.00 

•          •          • 

1 00. 00 

180.00 
25-83 

8.00 

7.00 
2.00 

'28.74 
42.00 
24.00 

$268.63 

36.09 

240.00 

100.00 

500.00 
120.00 

18.03 
*    \' 

9.00 

72.00 
14.30 

153-54 

12.00 
17.00 

lOO.CO 

220.00 

180.00 
12.42 

30.00 
67.20 

124.00 

72.00 
108.00 

14.37 
54-14 

101.79 
265.64 

149 


150 


SURPLUS  REVENUE. 


1865-6. 

1868-9. 

1869-70. 

1870-1. 

Cheshire  Co. 
Chesterfield 
Marlow  .     . 
Richmond  . 
Ringe     .     . 
Troy       .     . 
Westmoreland 
Winchester 

Sullivan  Co. 
Acvvorth 
Cornish  . 
Goshen  . 
Langdon 
Newport 

Grafton  Co. 
Bethlehem  . 
Bridgewater 
Canaan  . 
Enfield  .     . 
Hanover 
Haverhill    . 
Landaff 
Lebanon 
Lyman  . 
Orford    .      .      . 
Plymouth    . 
Waterville  . 

Coos  Co. 

Clarksville  .     . 
Dalton   .     .     . 
Dummer 
Milan      .      .      . 
Whitefield  .     . 

141 

19 

350 

52 
240 

70 

9 
19 

27 

.00 

.00 

.00 

-98 
-50 

.00 

-32 
.40 

.00 

60.30 

75-25 

•  •          • 

•  •          • 

•  •          • 

23-24 
119.00 

55.98 
90.00 

162.04 
42.95 
45.18 

100.00 

•  •          • 

•  •          • 

27.00 

57.20 
60.30 

56.00 
117.20 

90.00 

162.00 
87-44 

2.25 

42.98 
352.07 

2.00 

26.00 
27.00 

60.30 

78.00 

88.14 

202.00 

100.00 

93.60 

70.00 
160.50 
160.1S 

85-35 

3-17 
232.00 

100.00 

25-87 

932 
21.00 
27.00 

$1,277-13 

$1,278.51 

$2,663.03 

$2,765.99 

Total  for  1864-5,  $1,203.64  ;  for  1871-2,  $2,508.52. 
(The  School  Reports  for  those  years.) 


BIBLIOGRAPHICAL    INDEX. 


INTRODUCTORY  NOTE. 


When  I  began  to  search  for  materials  for  the  foregoing  account  of  the  various 
uses  to  which  the  States  put  the  surplus  revenue,  I  was  much  embarrassed  by 
not  knowing  where  to  turn  for  information.  Very  little  help  could  be  got  from 
any  one  else,  as  the  ground  was  almost  untrodden. 

Under  these  circumstances  it  seemed  best  to  give  an  exact  reference  for  every 
important  statement,  so  that  the  work  could  easily  be  verified,  and  to  furnish  a 
bibliographical  index  to  present  as  a  whole  all  the  sources  from  which  I  had 
drawn,  for  the  double  purpose  of  showing  succeeding  students  where  to  look  for 
original  matter,  and  of  enabling  them  instantly  to  tell  whether  they  have  dis- 
covered any  facts  to  which  I  failed  to  gain  access. 

My  chief  source,  it  will  be  seen,  has  naturally  been  the  acts  of  the  Legisla- 
tures of  the  various  States.  I  cannot  hope,  however,  that  I  have  exhausted  this 
mine,  for  every  one  who  has  had  experience  with  these  documents  knows  how 
imperfectly  they  are  indexed  ;  yet  as  some  five  hundred  volumes  were  to  be  con- 
sulted, it  goes  without  saying  that  the  indexes  had  to  be  relied  upon.  The 
difficulty  was  increased  by  the  varying  titles  under  which  the  matter  appeared. 
In  dealing  with  this  subject  one  cannot  feel  at  all  sure  that  he  has  done  his  best 
with  an  index  till  he  has  looked  for  the  titles  :  "  Appropriations,"  "  Deposits," 
"Education,"  "Money,"  "Public  Deposits  or  Money,"  "Revenue,"  "Sur- 
plus," and  "  United  States,"  unless  he  has  previously  learned  the  names  used  in 
the  State. 

In  the  case  of  the  "  American  Almanac,"  "  Niles'  Register,"  and  "  Hazard's 
Register,"  no  reliance  was  placed  upon  the  indexes,  but  more  than  twenty  vols, 
each  of  the  Almanac  and  Niles  were  examined  page  by  page. 

A  word  about  the  arrangement  of  this  index.  The  general  arrangement  is 
alphabetical.  All  general  authorities,  then,  are  in  alphabetical  order  ;  all 
authorities,  on  the  other  hand,  that  have  been  used  for  one  State  only,  are  to  be 
found  in  their  alphabetical  order  under  the  name  of  that  State,  following  the 
State  documents,  which  have  been  arranged  chronologically,  except  that,  in  gen- 
eral, Acts  precede  Reports.  Finally,  the  general  authorities  used  for  any  one 
State  are  summarized  in  italics  at  the  end  of  the  list  under  that  State. 

Adams'  Gallatin  :  The  Life  of  Albert  Gallatin.     By  Henry  Adams.     J.  B. 
Lippincott  &  Co.,  Philadelphia,  1879.     ^  vol.  8vo. 

151 


152  SUJiFLUS  REVENUE. 

ALABAMA. 

Acts  :  Acts  of  the  General  Assembly  of  Alabama,  for  1836,  Ferguson,  Tusca- 
loosa, 1836  ;  for  1853-4,  Brittan  &  Blue,  Montgomery,  1854  ;  for  1855-6, 
Bates  &  Lucas,  Montgomery,  1856  ;  for  1868,  J.  Stokes  &  Co.,  Mont- 
gomery, 1868  ;  for  1874-5,  W.  W.  Screws,  Montgomery,  1875  ;  for  1876-7, 
Barrett  &  Brown,  Montgomery,  1877. 

Clay  :  A  Digest  of  the  Laws  of  the  State  of  Alabama,  containing  all  the  statutes 
of  a  general  nature  in  force  in  Feb.,  1843.  Compiled  by  C.  C.  Clay. 
M.  J.  Slade,  Tuscaloosa,  1843. 

Code  of  1876  :  The  Code  of  Alabama,  1876.  Prepared  by  "Wade  Keyes,  Fern. 
M.  Wood,  and  John  D.  Roquemore,  successor  to  Fern.  M.  Wood.  Bar- 
rett &  Brown,  Montgomery,  1877. 

Walker  :  The  Revised  Code  of  Alabama.  Prepared  by  A.  J.  Walker.  Reid 
and  Screws,  Montgomery,  1867. 

Armstrong  :  Report  of  H.  Clay,  Superintendent  of  Education  of  Alabama,  for 
the  year  ending  Sept.  30,  1S82.     W.  D.  Brown,  Montgomery,  1883. 
{General  Authorities  :  Am.  Aim.,  1847  ;  Eaton;  I  Financ.  Reg.;  5  Hazard ; 
and  Niles,  vols.  57,  63,  andb"].) 

Am.  Alm.  :  The  American  Almanac,  vols.  8-32.  Boston,  1837-61  (various 
publishers). 

Am.  St.  Ann.  :  American  Statistical  Annual  for  the  year  1854.  Compiled  by 
Richard  Swainson  Fisher,  M.D.,  and  Charles  Colby,  A.M.  J.  H.  Colton 
&  Co.,  New  York,  1854. 

American  Year-book  :  The  American  Year-book  and  National  Register  for 
1869,  etc.,  etc.  Vol.  ist.  edited  by  David  N.  Camp.  O.  D.  Case  &  Co., 
Hartford,  1869. 

ARKANSAS. 

Acts  :  The  Acts  passed  at  the  fourth  session  of  the  General  Assembly  of 
Arkansas,  1842-3  ;  E.  Colby,  Little  Rock,  1843.  The  Acts  of  the  seventh 
session,  etc.,  1848-9  ;  Little  Rock,  1849.  The  Acts  of  the  eighth  session, 
etc.,  1850-1  ;  Little  Rock,  1851. 

English  :  Digest  of  Laws  in  force  in  1846  ;  with  notes  of  Superior-Court  de- 
cisions.    By  E.  H.  English.      8vo.     Pub.  by  the  State,  Little  Rock,  1848. 

Gould  :     Digest  of  Statutes  in  force  in  1856  :   with  notes  of  Superior-Court 
decisions.     By  J.  Gould.     8vo.     Pub.  by  the  State,  Little  Rock,  1858. 
{General  Atithorities  :     Am.  Aim.,  1845,  1856  ;  Ain.  Statis.  Annual,    1854  ; 
1  Bankers'  Mag.;   Hunt;  and  Trotter^ 

Bankers'  Mag.:  The  Bankers'  Magazine  and  State  Financial  Register,  etc. 
J.  Smith  Homans,  Baltimore,  1847.     Vols,  i,  5,  and  8. 

Benton's  Abridgt.  :  Abridgment  of  the  Debates  of  Congress  from  1789-1856. 
By  the  author  of  Thirty  Years'  View.  D.  Appleton  &  Co.,  New  York, 
1857.     Vols.  9  and  11. 


SURPLUS  REVENUE.  1 53 

Benton  :    Thirty  Years'  View  ;  or,  A  History  of  the  Working  of  the  American 

Government  for  Thirty  Years,  from  1820  to  1850.     By  a  Senator  of  thirty 

years.     D.  Appleton  &  Co.,  New  York,  1854.     2  vols.,  8vo. 
Blaine  :    Twenty  Years  of  Congress  :     From  Lincoln  to  Garfield.     By  James 

G.  Blaine.     Henry  Bill  Pub.  Co..  Norwich,  Ct.,  1884. 
Boston  Courier  :     The  Boston  Semi-Weekly  Courier.     Buckingham  &  Foote, 

Boston,  1836-7. 
Boston  Recorder  :     The  Boston  Recorder  (religious  weekly).     Boston,  1836. 
Calhoun's  Works  :    The  works  of  John  C.  Calhoun.     Edited  by  Richard  K. 

Cralle.     D.  Appleton  &  Co.,  New  York,  1854-7.     6  vols.,  8vo. 
Clay's  Works  :    The  Life,  Correspondence,  and  Speeches  of  Henry  Clay.    By 

Calvin  Colton,  LL.D.    A.  S.  Barnes  &  Co.,  New  York,  1857.    6  vol.,  8vo. 
Cong.    Record  :     Congressional    Record.     Containing   the    Proceedings   and 

Debates   of    the   48th   Congress,    ist   session.     Washington,    Government 

Printing-office,  1884. 

CONNECTICUT. 

Acts  :    The  Public  Statute  Laws  of  the   State  of  Connecticut,  passed  at  the 
May  and  December  sessions  of  1836,  and  the  May  session  of  1837.     John 
R.  Boswell,  Hartford,  1837. 
Public  Acts  passed  by  the  General  Assembly  of  the  State  of  Connecticut, 

May  session,  1855.     Thomas  H.  Day,  Hartford,  1855. 
The  General  Statutes  of  the  State  of  Connecticut.     John  H.  Burnham,  New 
Haven,  1866. 
Report  :    First  Annual,  of  the  Secretary  of  the  School  Board,  183S.    (Pub.  in 
the  Connecticut  Common-School   Journal.      Ed.  by  Henry  Barnard,  2d. 
Case,  Tiffany,  &  Burnham,  Hartford,  1842.) 
Annual  Report  of  the  Board  of  Education  of  the  State  of  Connecticut,  1884. 

Tuttle,  Morehouse,  &  Taylor,  New  Haven,  1884. 
{General  AtUhorities:     The  New  Haven  Herald  and  Eaton.) 
Conn.  Courant  :    The  Connecticut  Courant,  Hartford,  1836-7. 

DELAWARE. 

Acts  :  Laws  of  the  State  of  Delaware  passed  in  1837,  S.  Kinney,  Dover,  1837  ; 
in  1839,  etc.,  1839  ;  in  1843,  etc.,  1843  ;  in  1845,  etc.,  1845  ;  in  1847,  etc., 
1847  ;  in  1881,  etc.,  1881. 

Revised  Statutes  of  the  State  of  Delaware  (to  1852  inclusively).  Samuel  Kin- 
ney, Dover,  1852.  Revised  Statutes  of  the  State  of  Delaware  of  1852 
(brought  down  to  1874,  with  additions  and  amendments).  James  & 
Webb,  Wilmington,  1874. 
Digest  of  Laws  Relating  to  Free  Schools  in  the  State  of  Delaware.  J.  Kirke 
&  Sons,  Dover,  18S1. 


154  SURPLUS  REVENUE. 

Report,  Fifth   Annual,  of  the  Superintendent  of  Free  Schools,  for  the  year 
ending  Dec.  i,  1880.     Delawarean  Office,  Dover,  1881. 
{^General  author.:  Eaton.') 

Eaton  :  An  Address  on  National  Aid  to  Education.  By  Hon.  John  Eaton, 
U.  S.  Commissioner  of  Ed.  Government  Printing-Office,  Washington, 
1879.  (This  address  is  also  to  be  found  in  Circulars  of  Information  of  the 
Bureau  of  Education,  No.  2,  pp.  123-134.  Page  12  of  the  address,  as 
quoted  in  the  work,  corresponds  to  p.  123  of  the  Circular.) 

Financial  Register  :  The  Financial  Register  of  the  United  States.  [Edited 
by  Condy  Raguet.]     2  vols.,  8vo.     Philadelphia,  1837-38. 

FOLGER  :  Annual  Report  of  the  Secretary  of  the  Treasury  on  the  State  of  the 
Finances,  for  the  year  1883.  Charles  J.  Folger,  Secretary.  Washington, 
1883. 

Gales  and  Seaton  :  Register  of  Debates  in  Congress.  Vol.  III.  Gales  & 
Seaton,  Washington,  1S29. 

GEORGIA. 

Acts,  The,  of-  the  General  Assembly  of  the  State  of  Georgia  for  1837,  P.  L. 

Robinson,    Milledgeville,   1838  ;    for  1840,  W.    S.    Rogers,    Milledgeville, 

1841  ;  for  1S70,  Atlanta,  1870. 
Hotchkiss  :  A  Codification    of  the  Statute  Law  of  Georgia.     By  William  A. 

Hotchkiss.     J.   M.  Cooper,  Savannah,  and  John  F.   Trow  &  Co.,    New 

York,  1S45. 
Lewis  :  A  Letter  to  County  School-Commissioners,  etc.,  dated  Dec.  19,  1871. 

By   J.    R.    Lewis,  State  Commissioner.     Appended    to  the  First  Annual 

Report  of  the  State  School-Commissioner.     Atlanta,  1871. 
Prince  :  A  Digest  of  the  Laws  of  the  State  of  Georgia.     By  Oliver  H.  Prince. 

Published  by  the  author.     Athens,  1837. 
Reports:  Bank  Reports,   1841  and   1842;  and  a  Report  of  the  Central  Bank 

on  Nov.  I,  1841,  in  the  Chronicle  and  Sentinel  oi  Augusta,  Ga.      (Novem- 
ber ;  date  not  known.) 
(General  Authorities  :  Am.  Statist.  Ann.,  Eaton,  5  Hazard,  51  and  ^1  Niles.) 
Globe  :  The  Globe.     Blair  &  Rives,  Washington,  1836-7. 
Hazard  :     Hazard's  United  States  Commercial  and  Statistical  Register,  etc., 

etc.     Edited  by  Samuel  Hazard.      W.  F.  Geddes,  Philadelphia,  1839-41. 

5  vols.,  8vo. 
Von  Hock  :  Die  Finanzen  und  Finanzgeschichte  der  Vereinigten  Staaten  von 

America,      Von  Dr.  Carl  Freiherrn  von   Hock.     J.  G.    Cotta,  Stuttgart, 

1867. 
Hunt's  Yr.-Bk.  :    Hunt's  Merchants'  Magazine  Year-Book.      W.  B.  Dana  & 

Co.,  New  York,  18 71. 


SURPLUS  REVENUE.  155 

ILLINOIS. 

Acts:  Laws  of  the  State  of    Illinois,   1S36-7,    W.  Walters,  Vandalia,   1837; 

Laws  of  the  State  of  Illinois,  passed  at  the  special  session,  July  10-22,  1837, 

William  Walters,  Vandalia,  1837. 
Report,  Seventh  Biennial,  of  the  Superintendent  of  Public  Instruction  of  the 

State  of  Illinois. 
{General  Authorities  :  4  Hazard,  52  and  tl  Niles.) 

INDIANA. 

Acts  :  Laws  of  a  General  Nature  of  the  State  of  Indiana,  passed  1836-7,  Doug- 
las &  Noel,  Indianapolis,  1837  ;  in  183S-9,  do.,  1839  ;  in  1840-1,  do.,  1841. 
In  1S53,  J.  P.  Chapman,  Indianapolis,  1853  ;  in  1855,  A.  H.  Brown,  In- 
dianapolis, 1S55. 

The  Revised  Statutes  of  Indiana,  passed  at  the  27th  session  of  the  General 
Assembly.     Dowling  &  Cole,  Indianapolis,  1843. 

The  Revised  Statutes  of  the  State  of  Indiana,  1852.     J.  P.  Chapman,  In- 
dianapolis, 1852. 

The  Statutes  of  the  State  of  Indiana,  revision  of  1876.     By  Edwin  A.  Davis. 
Second  edition,  2  vols.,  8vo.     Bingham  &  Co.,  Indianapolis,  1878. 
Dillon  :  History  of  Indiana,  from  its  earliest  exploration  by  Europeans  to  1816, 
and  thence  to  1S56.     J.  B.  Dillon.     Bingham  &  Doughty,  Indianapolis. 

{General  Authorities  :  Am.  Aim.,  1846,  1849,  a«rt' 1852  ;  Am.  Siatis.  Attn., 
1S54  ;  I  Bankers'  Mag.  ;  Eaton  ;  3  Hazard ;  51  atid  57  Niles  ;   The  New 
York  Times,  Dec,  1883  ;  Trotter.) 
Jefferson's  Works  :  The  Writings  of  Thomas  Jefferson,  etc.     Edited  by  H. 
A.  Washington.  Taylor  &  Maury,  Washington,  D.  C,  1853.  9  vols.,  8vo. 

KENTUCKY. 

Acts  :     Acts  of  the  General  Assembly  of  Kentucky  in  1836-7,  A.  G.  Hodges, 

Frankfort,  1837  ;  in  1837-8,  do.,  1838  ;   in  1838-9,   do.,  1839  ;   in  1844-5, 

do.,  1845. 
Pickett  :     Report  of  the  Superintendent  of  Public  Instruction  for  the  years 

ending  June  30,   1880,  and  June  30,   1884.     S.   I.   M.  Major,  Frankfort, 

1882. 
{General  Authorities  :  Am.  Aim.,  1851,   1853;  '■j  Bankers'  Mag.;   3,4,  and 

5  Hazard ;  New  York  Journal  of  Coinvierce ,  1836  ;  58,  59,  and  to  Niles  ; 

Trotter.) 
Knox  :     United  States  Notes  ;  A  History  of  the  Various  Issues  of  Paper  Money 

by   the  Government  of  the  United  States.     By  John  Jay  Knox.     Charles 

Scribner's  Sons,  New  York,  1884. 


156  SURPLUS  REVENUE. 

LOUISIANA. 

Acts  :    Acts  of  the  first  session  of  the   13th  Legislature  of  Louisiana,   1837. 
Jerome   Bayon,  New  Orleans,  1837.      Acts  of  the  second  session  of  the 
same,  1837-8  ;  Jerome  Bayon,  New  Orleans,  1838. 
Acts  of  the  General  Assembly  of  Louisiana,  1855.    Emile  La  Sere,  New  Or- 
leans, 1855. 

VoORHiES :    The  Revised  Statute  Laws  of  the  State  of  Louisiana  up  to  iS6g. 
Compiled  and  Edited  by  Albert  Voorhies.     B.   Bloomfield  &  Co.,   New 
Orleans,  1876. 
{General Authorities  :  Am.  Statis.  Ami.,  Eaton,  66  Niles.) 

Mackenzie  :  The  Life  and  Times  of  Martin  Van  Buren,  etc.  By  William  L. 
Mackenzie.     Cooke  &  Co.,  Boston,  1846. 

MAINE. 

Acts  :  Public  Acts  of  the  State  of  Maine,  Jan.  Session,  1837  ;  Smith  and  Rob- 
inson, Augusta,  1837.  The  Same  for  the  Jan.  Session  of  1838  ;  L.  Sev- 
erance, Augusta,  1838. 

Shepley  :    Reports  of  Cases  Argued  and  Determined  in  the  Supreme  Judicial 
Court    of    the    State   of    Maine.     By   John    Shepley,    Counsellor-at-Law. 
Glazier,   Masters,   and  Smith,    Hallowell,  Me.,  1839,     (Vol.  XIV.,  Maine 
Reports.) 
{General  Authorities  :  Eaton;  The  Philadelphia  Press,  Nov.,  1883.) 

MARYLAND. 
Acts  :  Laws  Made  and  Passed  by  the  General  Assembly  of  the  State  of  Mary- 
land, in  1836-7,  Jeremiah  Hughes,  Annapolis,  1837  ;  in  1837-38,  do.,  1838. 
{General  Authorities  :  Am.  Aim.,  1840  ;  Atii.  Statis.  Ann.,  1854  ;  i  Bankers' 
Mag.  ;  2  Hazard;  51,  52,  57,  59,  and  t'},  Niles.) 

MASSACHUSETTS. 

Acts  :  Supplements  to  the  Revised  Statutes  :  General  Laws  of  Massachusetts 

passed  subsequently  to  the  Revised  Statutes.    Vol.  I.  (1836-53).    Dutton  & 

Wentworth,  Boston,  1854. 
Reports  :  The   5th  and  loth  Annual  Reports  of  the  Board  of  Ed.  of  Mass. 

Dutton  &  Wentworth,  Boston,   1842,  1847. 
{General  Authorities  :  Blair's  Globe,  Dec,  1836  ;  The  Boston  Courier,  1837.) 
Mercer  (Charles  Fenton)  :  An  Exposition  of  the  Weakness  and  Inefficiency  of 

the  Government  of  the  U.  S.     (Printed  anonymously,  1845.) 

MICHIGAN. 

Acts  :  Acts  of  the  Legislature  of  the  State  of  Michigan,  passed  in  1835-6,  J. 
S.  Bagg,  Detroit,  1836;  in  1837,  do.,  1837;  in  1837-8,  do.,  1838;  in 
1839,  do.,  1839  ;    in  1840,  G.  Dawson,  1840  ;  in  1841,  do.,  1841. 


SURPLUS  REVENUE.  157 

Curtis  :  A  Memoir  of  Benjamin  Robbins  Curtis,  LL.D.  ;  with  some  of  his 
Professional  and  Miscellaneous  Writings.  2  vols.,  8vo.  Edited  by  his 
son,  Benjamin  R.  Curtis.     Little,  Brown,  «&  Co.,  Boston,  1879. 

N.  B.— The  article  quoted,  "  Debts  of  the  States,"  was  first  published 
in  the  Noi-th  American  Review,  Jan.,  1844. 
{General  Authorities:  Am.  Aim.,  1842,  1847,  1848;  51,  56,  b'i  Miles;  Trotter.) 

MISSISSIPPI. 

Acts  :  Laws  of  the  State  of  Mississippi,  from  the  Jan.  Session,  1824,  to  the 
Jan.  Session,  1838  ;  Jackson,  1838.  Laws  Passed  at  an  Adjourned  Session, 
1839  ;  B.  D.  Howard,  Jackson,  1839. 

Democratic  Rule  :  Nine  Years  of  Democratic  Rule  in  Mississippi.  Jackson, 
1847.     (Published  anonymously,  but  written  by  G.  L.  Potter.) 

MISSOURI. 

Acts  :    Laws  of  the  State  of  Missouri,  passed  1836-7,    C.    Grum,  Jefferson, 
1837  ;  in  1S38-9,   do.,  1839  ;  in  1842-3,  A.   Hammond,  1843  ;  in  1852-3, 
James  Lusk,  1853. 
The  Revised  Statutes  of  the  State  of  Missouri,  1855.     By  Charles  H.  Har- 
din.    2  vols.,  8vo.     James  Lusk,  Jefferson,  1856. 
The  General  Statutes  of  the  State  of  Missouri,  passed  1866.     E.  S.  Foster, 
Jefferson,  1866. 
Myers'  Supp.:  Myers'  Supplement  to  Wagner's  Missouri  Statutes,  by  William 
G.  Myers,  Esq.     W.  J.  Gilbert,  St  Louis,  1877. 
The  Revised  Statutes  of  the  State  of  Missouri,  1879  ;  2  vols.     8vo.     Carter  & 

Regan,  City  of  Jefferson. 
(General Author.:  Eaton.) 
Nat.  Al.  and  A.  R.:  The  National  Almanac  and  Annual  Record  (for  1863  and 

1864).     Geo.  Childs,  Philadelphia,  1863,  1864. 
Nat.    Intell.:   The  National  Intelligencer.     Gales  &  Seaton,    Washington, 
1836-7. 

NEW   HAMPSHIRE. 

Acts  :  Laws  of  New  Hampshire,  passed  at  the  Nov.  Session,  1836,  Cyrus  Bar- 
ton, Concord,  1837;  the  same,  passed  June,   1838,   do.,   1838  ;  the  same, 
passed  June,  1839,  do.,  1839  ;  the  same,  passed  June,  1841,  Barton  &  Car- 
roll, Concord,  1841. 
The  Revised  Statutes  of  the  State  of  New  Hampshire,  passed  Dec.  23,  1842. 

Carroll  &  Baker,  Concord,  1843. 
The  General  Statutes  of  the  State  of  New  Hampshire,  1867.     J.  B.  Clarke, 
Manchester,  1S67. 

Reports  :  Annual  Report  of  the  Board  of  Education  of  New  Hampshire,  for 
1865-6,  G.  B.  Jenks,  Concord,  1866  ;  for  1868-9,  J-  B.  Clarke,  Manches- 


158  SURPLUS  REVENUE. 

ter,  1869;  for  1869-70,  do.,  1870  ;  for  1870-71,  O.  C.  Moore,  Nashua,  1871. 
{General  Authorities :    Am.  Aim.,   1850;  Blair's  Globe.  Dec,  1836;  Boston 
Courier,  Dec,   1836  ;  5  Hazard ;  Nat.  Aim.  and  Ann.  Rec,  1864  ;  A^ew 
Yorker,  Dec,  1836  ;  52  Niles.) 
New  Haven  Herald  :  New  Haven,  1836-7. 
New  Haven  Palladium  :  New  Haven,  1836-7. 
New  Haven  Register  :  The  Columbian  Register,  New  Haven,  1836-7. 

NEW  JERSEY. 

Acts  :  Acts  of  the  General  Assembly  of  New  Jersey  for  1836-7,  Trenton,  1837  ; 

for   1838-g,   P.  J.  Gray,  Camden,    1839  ;  for  1867,  Chiswell  and  Wurts, 

Paterson,  1867. 
Revision  OF  N.  J.:  Revision  of  the  Statutes  of  New  Jersey.    J.  L.  Murphy, 

Trenton,  1877. 
Raum  :   History  of  New  Jersey,  etc.,  etc.   By  J.  O.  Raum.  J.  E.  Potter  &  Co., 

Philadelphia,  1877. 
{General  Authorities  :    Atn.   Aim.,    1852-61  ;  Boston   Courier,   Jan.    1837  ; 

Eaton;  Nat.  Aim-,  and  Ann.  Rec,  1863.) 

NEW  YORK. 

Edmunds  :  Satutes  at  Large  of  the  State  of  New  York  ;  Edited  by  John  W. 
Edmunds.     Weed.  Parsons,  &  Co.,  Albany,  1869.     6  vols.     8vo. 

Fay  :  Digest  of  the  Laws  of  New  York  ;  Comprising  the  Revised  Statutes  and 
Statutes  of  General  Interest,  in  force  Jan.  i,  1874.  By  Joseph  D.  Fay. 
James  Cockroft  &  Co.,  New  York,  1876. 

The  American  Protectionist  :    Marcus  Hanlon,  New  York  (June  9,  1853). 

Reports  :  Annual  Reports  of  the  Comptroller  of  the  State  of  New  York,  for 
the  years  ending  Sept.  30,  1882  and  1883.  Weed,  Parsons,  &  Co.,  Albany, 
1883  and  1884. 
{General  Authorities  :  Am.  Aim.  passim  ;  Blair's  Globe,  Jatt.  1837  ;   5  Haz- 
ard j  57  Niles ;  and  Seward's  Works.) 

New  Yorker  (The)  :  Pub.  by  H.  Greeley  &  Co.,  New  York,  1836-7.  (Third 
volume.) 

New  York  Journal  of  Commerce  :  Edited  by  David  Hale  and  Gerard  Hal- 
lock,  New  York,  1836-7. 

New  York  Spectator  :  Francis  Hall  &  Co.,  New  York,  1837. 

Niles  :  Niles'  Weekly  Register  (Edited  by  PI.  Niles,  later  by  W.  Ogden  Niles, 
and  later  by  Jeremiah  Hughes).     Baltimore.     Vols.  12,  31,  and  50  to  73. 

NORTH  CAROLINA. 

Acts  :  Laws  of  North  Carolina,  passed  1836-7,  T.  J.  Lemay,  Raleigh,  1837  ; 
in  1838-9,  J.  Gales  &  Son,  do.,  1839  ;  in  1848-9,  T.  J.  Lemay,  do.,  1849  \ 
in  1850-1,  do.,  1851. 


SURPLUS  REVENUE.  159 

The  Revised  Statutes  of  North  Carolina,  passed  1836-7  ;  Turner  &  Hughes, 
Raleigh,  1837. 
The  Treasurer's  Report  :  Dec,  1840.     (Communicated  to  the  writer.) 
{General  Authorities :  Am.  Aim.,    1858;  American  Year-Book ;  \  Hazard; 
Hunt ;  51  Niles.) 

OHIO. 

Acts:  Acts  of  a  General  Nature,  passed  1836-7,  vol.  35,  S.  R.  Dolbee,  Co- 
lumbus, 1837  ;  in  1837-3,  vol.  36,  S.  Medary,  do.,  1838  ;  in  1840-1,  vol. 
39,  do.,  1841  ;  in  1842-3,  vol.  41,  do.,  1843  ;  in  1849-50,  vol.  48,  Scott 
&  Bascom,  do.,  1850  ;  in  1862,  vol.  59,  R.  Nevins,  do.,  1862  ;  in  1868-9, 
vol.  66,  Myers  &  Bro.,  do.,  1869. 

Statutes  of  the  Slate  of  Ohio  of  a  General  Nature,   in  force  1840-1.      S. 
Medary,  Columbus,  1841. 

Statutes  of  Ohio  of  a  General  Nature,  in  force  1854  ;  collated  and  compiled 
by  Joseph  R.  Swan.     H.  W.  Derby  &  Co.,  Cincinnati,  1854. 

The  Revised  Statutes  of  the  State  of  Ohio,  in  force  Jan.  i,  1880.     H.  W. 
Derby  &  Co.,  Columbus,  1879. 

{General  Authorities  :   Am.  Aim.,    1839,    185 1,  and  ff ;    i   and  5  Bankers' 
Mag.  ;  2  Hazard.) 

PENNSYLVANIA. 

Acts  :  Laws  of  the  General  Assembly  of  Pennsylvania,  passed  in  1835-6.  Theo. 
Fenn,  Harrisburg,  1836  ;  in  1836-7,  do.,  1837. 

Reports  :  Report  of  the  State  Treasurer  on  the  Finances  of  the  Common- 
wealth. Packer,  Barrett,  &  Parke,  Harrisburg,  1837. 
Fourth  Annual  Report  of  the  Common  Schools,  Academies,  and  Colleges  of 
the  Commonwealth  of  Penn.  Thomas  H.  Burrowes,  Supt.  Pecker,  Bar- 
rett, and  Parker,  Harrisburg,  1838. 
Sixteenth  Annual  Report  of  the  Superintendent  of  the  Common  Schools  of 
Penn.,  for  the  year  ending  June,  1849.     Townsend  Haines,  Supt. 

Penn.  Finances  :  A  Brief  Review  of  the  Financial  History  of  Pennsylvania, 
etc.,  etc.     By  Benjamin  M.  Mead.     Lane  S.  Hart,  Harrisburg,  1881, 
{General  Authorities:    The  American,  Dec,    1883;   Boston  Recorder,  Dec., 
1836;  I  Financial  Register ;   2  Hazard;    55  Niles;    The  New    Yorker, 
Apiil,  1836  ;  Philadelphia  Press,  Dec.  2Qth,  1S83.) 

Reynolds  :  My  Own  Times  ;  embracing  also  the  History  of  my  Life.  By  John 
Reynolds  [Gov.  of  III.,  1830-4].  Chicago  Historical  Society,  Chicago,  1879. 

RHODE  ISLAND. 

Acts  :  Public  Laws  of  Rhode  Island,  passed  since  Jan.,  1835  (publishers  not 
mentioned)  ;  since  Jan.,  1837  ;  since  Jan.,  1840  ;  in  June,  1841  ;  in  June, 
1842  ;  in  Oct.,  1842  ;  in  May,  1843. 


l6o  SURPLUS  REVENUE. 

School  Laws  :  Acts  Relating  to  the  Public  Schools  of  Rhode  Island.  Provi- 
dence, 1867. 

Revised  Statutes  :  The  Revised  Statutes  of  the  State  of  Rhode  Island  and 
Providence  Plantations.     Sayles,  Miller,  &  Simons,  Providence,  1857. 

Stockwell  :  A  History  of  Public  Education  in  Rhode  Island  from  1836  to 
1876.     Edited  by  Thomas  B.  Stockwell.     Providence,  1876. 

Seward  :  Autobiography  of  W.  H.  Seward.  Edited  by  F.  W.  Seward.  D. 
Appleton  &  Co.,  New  York,  1877. 

Seward's  Works  :  The  Works  of  William  H.  Seward.  Edited  by  George  E. 
Baker.     Redfield,  New  York,  1853.     3  vols.  8vo. 

SOUTH  CAROLINA. 

Acts  :  Acts  and  Resolutions  of  the  General  Assembly  in  1836,  S.  Weir,  Colum- 
bia, 1837  ;  in  1837,  do.,  1838  ;  in  1838,  Pembertons,  do.,  1839  ;  in  1839, 
A.  H.  Pemberton,  do.,  1839. 
Reports  and  Resolutions  of  the  General  Assembly  of  South  Carolina,  in  1840, 
A.  H,  Pemberton,  Columbia,  1841  ;  in  1843,  do.,  1844  ;  in  1847,  A.  G. 
Sumner,  do.,  1847  ;  in  1849,  J-  C.  Morgan,  do.",  1849.  (These  Reports  in 
the  edition  I  used  were  found  with  the  acts  of  the  same  year.) 

McCuLLOCH  ;  Dictionary,  Geographical,  Statistical,  and  Historical.  ByJ.  R. 
McCuUoch.     Harper  &  Brothers,  New  York.     2  vols.  8vo. 

Poor's  Manual  :  Manual  of  the  Railroads  of  the  United  States  for  1869-70, 
etc.  ;  and  the  same  for  1883.     By  Henry  V.  Poor.     H.  V.  &  H.  W.  Poor, 
New  York,  1869. 
{General  Authorities  :  Am.  Aim.,  1845,  1853-61  ;    i  and  8  Bankers'  Mag.  ; 

2  Financial  Reg.  ;  The  Globe,  Sept.,  1836,  yan.  1837  ;  51,  55,  56  Niles.) 
Statesman's  Man.  :  The  Statesman's  Manual.     By  Edwin  Williams.     Ed- 
ward VN^-ilker,  New  York,  1846.     (2  vols.  8vo.,  paged  consecutively.) 

Sumner  :  Andrew  Jackson  as  a  Public  Man,  etc.  By  William  Graham 
Sumner.  Houghton,  Mifflin,  &  Co.,  Boston,  1882.  (American  Statesmen 
Series.) 

"  Surplus"  Question  (The)  :  A  Plain  Statement  of  Facts  Concerning  the  Na- 
tional Revenue  and  General  Taxation  of  the  PeojDle.     (No  publisher.     A 

campaign  document  of  the   Penn.   Republicans  in  favor  of  wholesale  dis- 
tribution.) 

TENNESSEE. 

Acts  :  Public  Acts  of    Tennessee,   passed  at  the  called  session  of  1836,   S. 

Nye  &  Co.,  Nashville,  1836;  passsed  1837-8,  do.,  1838  ;  passed  1841-2  ; 

D.  Cameron,  Murfreesborough,   1842  ;  passed  1865-6,  S.  C.  Mercer,  Mur- 

freesborough,  1866. 
School  Laws  :  Compilation  of  the   School  Laws  of    Tennessee.     Published 

with  the  Acts  of  1853-4.    McKennie  &  Brown,  Nashville,  1854. 


SURPLUS  REVENUE.  l6l 

Report:   First    Report   of  the  Superintendent  of    Public   Instruction    for    the 

State  of  Tennessee  (John  Eaton,  Jr.).     Geo.  Edgar  Gresham,  Nashville, 

1869. 
{General  Authorities :    Am.  Aim.,    1849;    Am.    Statist.  Aim.,    1853;    i,   4 

Bankers  Mag.;  i  Financial  Reg.;  i,  3.  5  Hazard ;  57,  63,  64,  67  Niles  ; 

Trotter. ) 
Thompson  :  Relief  of  Local  and  State  Taxation  through  the  Distribution  of 

the    National   Surplus.      By    Robert    Ellis   Thompson.     E.    Stern   &  Co., 

Philadelphia,  1883.     (A  series   of  articles   reprinted    from    The  American, 

newspaper.) 
Trotter  :  Observations  on  the  Financial  Situation  and  Credit  of  Such  of  the 

States  of  the  North  American  Union  as   Have  Contracte<l  Public  Debts, 

etc.,  etc.     By  Alexander  Trotter,  Esq.     Longman,  Orme,  Brown,  Green, 

and  Longmans,  London,  Dec,  1839. 
United  States   Reports  :  Vol.   CXL     Banks  &  Brothers,    New   York  and 

Albany. 

VERMONT. 

Acts:  Acts  Passed  by  the   Legislature  of  Vermont   in   October,  1836.     E.  P. 
Walton,  Montpelier,  1836. 

The  Revised  Statutes  of  Vermont,  passed  Nov.  19,  1839.     C.  Goodrich,  Bur- 
lington, 1840. 

The  General   Statutes   of  the  State  of  Vermont,  passed  in  1862.      Published 
by  the  State,  1863. 

The  Revised  Laws  of  Vermont,  1880.     Tuttle  &Co.,  Rutland,  1881. 
Thompson  :    History  of   Vermont,    Natural,   Civil,    and  Statistical,    etc.     By 
Zallock  Thompson.     Chauncey  Goodrich, ^Burlington,  1842. 

(Genl.  Authorities  :  Am.  Aim.,  passim.;  i  Bankers'  Mag.) 

VIRGINIA. 

Acts  :    Acts    of  the    General    Assembly   of   Virginia,    passed    in    1836-7,    T. 

Richie,  Richmond,  1837  ;  the   same,  passed   in  the  extra  session  of  June 

1837,  do.,  1837  ;  the  same,  passed  in  1838,  do.,  1838. 
Report  :   First   Annual    Report   of  the  Superintendent  of  Public  Instruction. 
Richmond,  1871. 

{General  Authorities  :  Am.  Aim.,  1857-8-9;  Mercer;  51,  52,  ^c)  Niles.) 
Webster's  Corrsp.  :  The  Private  Correspondence  of  Daniel  Webster.     Edited 

by  Fletcher  Webster.     2  vols.  8vo.     Little,  Brown,  &  Co.,  Boston,  1857. 
Webster's  Works  :  The    Works  of    Daniel  Webster.     6  vols.  8vo.     Little, 

Brown,  &  Co.,  Boston,  1851. 
WiRTH  :   Geschichte  der  Handelskrisen,  von   Max  Wirth.     J.  D.   Sauerlander, 

Frankfort-a-M.,  1874.     i  vol.  8vo.     2te  ;  Aufl. 


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